Wells Fargo executives are celebrating this weekend. It isn't because of Fed-subsidized negative interest rates-- although I'm sure they're delighted about that too-- but because a St. Paul jury fined them $30 million in a Minnesota fraud case. Huh?
Yeah, you heard, so to speak, right. Four Minnesota nonprofits-- the Minnesota Workers’ Compensation Reinsurance Association and three charitable foundations-- successfully made the case that Wells Fargo marketed a risky, difficult to understand investment it portrayed as safe. But they wanted $100 million in damages so the celebrating executives were celebrating how they had saved $70 million. The jury found the claim that the bank was looking after its own interests, rather than the clients, this ignoring the entire concept of fiduciary responsibility, rang true with the jurors. How could it not?
The banks seemed to plead that they were in over their heads and didn't understand the complex investments they had put their clients in either! From yesterday's Marketplace on NPR:
SUSAN LUNDY: They sat up there and basically said things like, "I didn't know we had a securities lending department, I didn't know what an SIV was, I had to look it up on Wikipedia." So I know it's a huge corporation, but that didn't settle well with me.
Then came glimpses into the bank's internal panic, as the market tanked: E-mails that refer to the clients as "hostages"-- that openly worry whether to tell them how bad things were.
LUNDY: When things fell apart, there were bad decisions that were made. And I think by sticking by those decisions, they did not adhere to their fiduciary duty.
"Fiduciary duty"-- basically a legal term for putting your clients' interests first. The jury said Wells Fargo fell short, not least by letting some big investors get their money out while keeping small ones in the dark.
In effect, Wells Fargo is celebrating because they weren't found guilty of criminal fraud, just negligence. Yipppeeeee!
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