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United States V. Wells Fargo Bank



 

Case Number: #1:21-cv-08007

Date Filed: September 27, 2021

Court: U.S Court for the Southern District of New York

Plaintiff: United States of America

Defendant: Wells Fargo Bank N.A


  • Case Information: From 2010 through 2017 (the "Covered Period"), Wells Fargo defrauded 771 of its commercial customers who used the Bank's FX services-many of them small or medium-sized businesses or federally-insured financial institutions-in violation of the mail fraud, wire fraud, and bank fraud statutes, 18 U.S.C. §§ 1341, 1343, 1344, by (i) falsely representing to the Customers that the Bank would charge and/or was charging certain fixed FX spreads or sales margins on the Customers' FX transactions with the Bank (which the Bank sometimes referred to internally as "fixed-pricing agreements"), (ii) financially incentivizing its FX sales specialists to overcharge the Customers while failing to take steps to ensure that FX sales specialists would comply or were complying with fixed-pricing agreements, and (iii) systematically charging the Customers higher FX spreads or sales margins than Wells Fargo represented it would charge and/or was charging in fixed-pricing agreements or otherwise, while concealing the overcharges from the Customers. Through this brazen and wide-ranging fraud, Wells Fargo was able to secretly obtain tens of millions of dollars from the Customers to which the Bank was not entitled.


  • Plaintiff Arguments:

  1. Wells Fargo profited from conducting FX transactions with its customers by marking up the prices on currency it was selling and marking down the prices on currency it was buying from customers for their outgoing and incoming wire transfers.

  2. During the Covered Period, many Wells Fargo FX sales specialists systematically and fraudulently overcharged hundreds of the Bank's commercial customers by repeatedly applying larger sales margins or spreads to customer FX transactions than they represented the Bank would charge and/ or was charging.

  3. At times, Wells Fargo's FX sales specialists charged the same customer different spreads depending on which representative of the customer happened to be involved in executing the trade. Specifically, Wells Fargo's FX sales specialists would charge larger spreads on transactions requested by certain customer representatives thought to be less sophisticated or experienced in FX trading.

  4. By giving improper financial incentives to FX sales specialists to prioritize maximizing FX revenue over all else, while simultaneously providing no meaningful or effective oversight to prevent its employees from fraudulently overcharging customers, Wells Fargo created a work environment in which defrauding or otherwise taking advantage of customers became normal business practice.


  • Laws Cited:

Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA"), 18 U.S.C. § 1833a

Mail fraud, wire fraud, and bank fraud statutes, 18 U.S.C. §§ 1341, 1343, 1344

Venue, 28 U.S.C. §§ 139l(b)(l) and (b)(2)

AML (Anti-money laundering)


  • Defendant Argument:

  1. Plead guilty to charges

  2. Agreed to a stipulation


  • Case Verdict: Wells Fargo admits, acknowledges, and accepts responsibility for the following conduct: Wells Fargo shall make the following payments within fourteen (14) days of the Effective Date: (a) a payment to the United States in the sum of $35,337,319.90, plus interest as provided below, which shall constitute a civil penalty pursuant to FIRREA (the "Civil Penalty Amount"); and (b) a payment of $2,000,000.00, plus interest as provided below, which shall constitute money subject to forfeiture to the United States under 18 U.S.C. 981(a)(1)(C) (the "Forfeiture Amount"). The interest specified in this Paragraph shall be compounded annually at 1.63% accruing from May 28, 2021, to the date on which the Civil Penalty Amount and Forfeiture Amount are paid as specified in this Paragraph. Wells Fargo shall pay the Civil Penalty Amount and Forfeiture Amount in accordance with instructions to be provided by the United States Attorney's Office for the Southern District of New York.


 

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