Category Archives: Uncategorized

KPMG became aware, as early as 2013, of “instances of unethical and illegal conduct by Wells Fargo employees.”

As calls for the replacement of Wells Fargo’s board mount, experts say attention — and blame — for a continuing pattern of misbehavior should also be focused on the company’s external auditor, KPMG LLP.

The record of management failures at Wells WFC, -0.23% started with revelations last year that millions of accounts had been opened illicitly. It got longer after the admission last month that the bank had also forced unneeded auto insurance on customers and neglected to refund optional guaranteed asset protection, so-called GAP, coverage for auto loan borrowers.

Politicians and regulators see the misbehavior as a pattern that should have been caught — and stopped. And there have been consequences for the bank. One CEO was forced to step down and forfeit millions of dollars in incentive compensation. Thousands of workers, including several executives, have been fired. Most recently the bank reshuffled its board, replacing its chairman and adjusting board committee memberships including on its audit and examination committee.

But external auditors should serve as another line of defense. Each year, auditors offer an opinion on whether their clients’ financial statements are truthful. To do so, the auditors have to determine whether they have enough confidence in the company’s internal controls to offer that blessing.


“There’s been far too little attention since the crisis on how the external auditors should be looking out for the public,” Andy Green, managing director of economic policy for the Center for American Progress, told MarketWatch.

Read on.

Dallas firm Baron & Budd files class again against Wells Fargo over auto insurance charges

SAN FRANCISCO – A new federal lawsuit filed in a San Francisco federal court by a Dallas law firm is accusing troubled bank Wells Fargo of racketeering violations and fraud in relation to auto loans.

The bank is apologizing after admitting that it charged its borrowers for auto insurance they did not ask for or need, causing many delinquencies, and in some cases car repossessions.

Dallas law firm Baron & Budd filed the lawsuit accusing Wells Fargo of violating California’s Unfair Competition Law and Indiana’s Deceptive Consumer Sales Act.

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Bank of America to Pay $6 Million to Bankrupt Couple Evicted From Home

And I remember reading this story…

Bank of America Corp. has agreed to pay more than $6 million to a California couple whom a federal judge said had been harassed and illegally foreclosed upon by the bank’s mortgage unit, ending an eight-year-long dispute.

The proposed settlement between the bank and Erik and Renee Sundquist would enable them “to end a long personal and legal nightmare that has impacted every facet of their and their sons’ lives,” according to court papers the couple filed to request that their 2014 lawsuit against the bank be dropped.

The deal calls for Bank of America to pay a fraction of the fine of more than $46 million ordered by Judge Christopher Klein in March. In his ruling, the judge said the bank’s mortgage modification process and mistaken foreclosure on the Sundquists’ home in Lincoln, Calif., left them in “a state of battle-fatigued demoralization.”

The exact amount that the bank will pay the Sundquists is confidential, according to documents filed Tuesday in U.S. Bankruptcy Court in Sacramento. The earlier order called for the bank to pay the couple nearly $6.1 million in damages.

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SEC drops case against ex-JPMorgan traders over ‘London Whale’

  • The SEC dropped its civil lawsuit against two former JPMorgan Chase traders on Friday.
  • The traders were accused of trying to hide some of the bank’s $6.2 billion of losses tied to the 2012 “London Whale” scandal.
  • The decision came four weeks after the U.S. Department of Justice abandoned its criminal case against both men.

The top U.S. securities regulator on Friday dropped its civil lawsuit accusing two former JPMorgan Chase traders of trying to hide some of the bank’s $6.2 billion of losses tied to the 2012 “London Whale” scandal.

The decision by the U.S. Securities and Exchange Commission to dismiss charges against Javier Martin-Artajo and Julien Grout came four weeks after the U.S. Department of Justice abandoned its criminal case against both men, who have denied wrongdoing.

Prosecutors said their case ran into trouble after testimony from Bruno Iksil, a cooperating witness who had been dubbed the London Whale, proved unreliable.

Iksil has publicly shifted blame for the losses toward upper JPMorgan management, including Chief Executive Officer Jamie Dimon, who at first called the matter a “tempest in a teapot.”

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Eliot Spitzer: The U.S. Never Had the Will and the Ability to Hold the Most Powerful to Account


We will publish this interview in two parts (update: read the second part here), with the first part focusing on financial regulation and regulatory capture.

Guy Rolnik: The last time we sat down for an interview was in 2011, right after the Occupy Wall Street protests began and the growing discontent of many Americans with the financial system came into prominence. What has changed since then?

Eliot Spitzer: Wall Street is different today than it was either in 2008 or 1998. It’s more concentrated in terms of the too big to fail banks. Now, one can have a conversation [on whether] that issue has been confronted with Dodd-Frank or not.

There’s greater concentration, but I also think there has been some positive movement in terms of capital requirements and de-risking their portfolios, because some of the most toxic derivatives and lending practices have been eliminated.

There’s also a reality, which is that the next crisis is never quite like the last one, and so while we may have dealt with derivatives, and we may have dealt with certain elements of subprime lending, what’s going to blow up next is something we’re not thinking about right now.

GR: I’m reading Jesse Eisinger’s book, The Chickenshit Club. Eisinger, who was a guest here at the Stigler Center last year, argues that in the last 15 years or so the U.S. has “lost the will and the ability” to pursue white collar criminal investigations and indictments when it comes to the CEOs of large firms. Do you share this view?

ES: I’m not sure we lost it, because I don’t think we ever had it.

GR: And if I had asked you that 15 years ago, when you were New York’s Attorney General?

ES: I don’t want to sit down and toot my own horn and say that we did some useful and important stuff, but I think that, by and large, there has been a failure. The S&L crisis might be the exception. There has been a failure to rigorously oppose the obligations of ethical banking throughout the system on a regular basis.

That continues to be the case, because it is difficult. Look at the continuing scandals that are pouring out of Wells Fargo, with the most recent headlines about their having sold car insurance to people without any rationale, whatsoever.

Frankly, I view the Wells Fargo problems and the Volkswagen problems as being perhaps the most remarkable, because they involved the greatest number of people, and therefore speak directly to a corporate culture that created incentives to act in a way that was blatantly illegal.

In other conspiracies, like the Libor conspiracy, the criminal acts arose among a limited number of people who saw the opportunity to garner significant upside, they thought, in a way that won’t be detected. What is remarkable this time is that you have that many people involved, and you say, “how could that possibly have happened?” That’s why the Wells Fargo saga, both round one, with the false accounts, and then round two, with the auto insurance, and Volkswagen surreptitiously avoiding the emissions detection, are absolutely staggering to me in terms of the scope of the conspiracy.

Even if there was a significant desire in the immediate aftermath of 2008 to do something—and Dodd-Frank did something—now the pendulum has swung back the other way with the new leadership at the Securities and Exchange Commission (SEC) and the Office of the Comptroller of the Currency (OCC) affirmatively saying, “We want to roll back those obligations (the few obligations that were imposed) and become more lenient,” because they believe that these obligations were stifling economic activity, which I honestly don’t think is the case.

GR: You mentioned the actions taken by the current administration, but before that there were eight years of the Obama administration, and Democrats have been in power for 16 of the last 24 years.

ES: I say none of this to suggest that the Justice Department under Eric Holder should be held out as an example. Just the opposite. [Former Assistant Attorney General for the Criminal Division of the Department of Justice] Lanny Breuer’s articulation of “too big to prosecute goes down as, on the one hand, the most honest and also the most disturbing statement made by the head of the Criminal Division in the Justice Department.

It would frankly have been more understandable for the Treasury Secretary to say, “Guys, we consider these are the implications.” But for the head of the Criminal Division to basically give carte blanche by saying, “You’re too big to prosecute,” was mind-boggling.

Former Wells Fargo rep expelled for blowing off FINRA probe

Another former bank rep has been booted out of the industry for refusing to comply with a FINRA investigation.

Kerbye Arthur, a broker associate who worked for Wells Fargo in Greenacres, Florida, was barred for ignoring FINRA’s repeated requests for documents and information it needed to investigate allegations that she made inaccurate statements on a mortgage gift letter, according to her recent settlement with the regulator.

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Tampa Bay homeowners sue JPMorgan Chase for billing on already-paid mortgages

ST. PETERSBURG — Two Tampa Bay homeowners are suing JPMorgan Chase Bank for attempting to continue to collect on what they say were already-paid-off mortgages.

Seeking class action, the lawsuit alleges that JPMorgan Chase, “as part of its customary and uniform practice and procedure, attempts to collect debts on its customers’ mortgages even though the debt has been satisfied.”

According to the suit filed last week in Pinellas County circuit court, Brian Huff secured a $30,000 mortgage with JPMorgan Chase in 2006 for a New Port Richey house. In late 2014, Huff paid off the mortgage in full.

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