Three years on, the Wells Fargo scandal is still breathtaking

The fake-accounts problem at Wells Fargo & Co. has been public now for three years, with regulatory filings, court documents and the board's own postmortem.

Yet a bank regulator proved last week with a new filing that the story of what went on at Wells still has the power to take your breath away.

Here's one detail, appearing in what the Office of the Comptroller of the Currency (OCC) just released: "Hundreds of thousands of employees in the Bank's largest line of business engaged in systemic illegal activity for 14 years."

Hundreds of thousands.

This filing lays out the case against five former executives of Wells Fargo, including longtime community banking head Carrie Tolstedt, who is facing a $25 million fine. She is still fighting the OCC, but her old boss, former Wells Fargo CEO John Stumpf, tossed in the towel. He agreed to a $17.5 million fine and a lifetime ban from the industry.

These are unprecedented sanctions for individuals, and such big numbers had people last week reaching for explanations. Could there have been a turn in the political environment where a federal regulator feels newly empowered?

There is a more obvious explanation. Unprecedented personal fines are called for when executives do what these folks did.

Court filings that describe all the alleged wrongs aren't really meant to be fair and evenhanded, of course, yet it's hard to imagine a rebuttal. These things didn't really happen?

We all know better.

Thousands of people at the bank knew better. Even the friends and family of Wells Fargo senior executives knew better.

One of the ways we know is from a story told in the OCC document. It turned out a wife of one of the banking company's executives wasn't happy in 2012 to receive two Wells Fargo debit cards in the mail she hadn't wanted. So the executive raised the issue with Tolstedt and spoke of it around the company.

Tolstedt later asked him to stop telling that anecdote because it didn't make her community bank unit look good.

Much of the blame for the fake-accounts abuses was pointed at Tolstedt, including a damning statement in the OCC document from Stumpf.

But the OCC easily got Stumpf to acknowledge that this was systemic, meaning if you were there, you were part of the problem. Of course, he was the CEO.

So many Wells people contributed in so many little ways, and one of the most fascinating stories is how the lawyers did.

The legal staff often gets involved when employees are fired, of course, and at Wells Fargo firings happened all the time. Just about everybody who worked directly with customers seemed to have a quota, and from 2011 into 2016 Wells Fargo fired more than 8,500 people for falling short.

The sales-management program had gone so far off the rails, according to the OCC, that in 2009 senior management learned that employees were getting into trouble with their bosses even if they had been able to make it over the bar.

In at least one case, the unofficial (yet clearly real to managers) goal was 120% of the official target. Management found out that a manager was preparing to fire a banker for achieving only 105%.

What was hard to do was getting fired for cheating.

That's one of the areas where the law department stepped in to help out, by trying to get an exception in what's called the fidelity bond. It's a form of insurance under which the bank won't be held liable for the dishonest acts of employees.

That means banks have to fire people caught doing something dishonest. But with so many Wells Fargo front-line staff forced into trying to cheat to meet their arbitrary sales goal, the community bank wanted an exception.

Wells Fargo finally got one in 2016.

The lawyers also saw firsthand what happened when a former Wells Fargo employee who had been fired for missing the sales target filed for unemployment compensation.

It's usually hard to get this kind of compensation if you had been fired, but the states where these former Wells Fargo people lived invariably granted it. Wells Fargo lawyers would go to court or an administrative hearing to dispute it, where they would lose.

In the state of Washington over one three-year period, the bank had a perfect losing record.

What was happening was that former employees got to tell a judge how Wells Fargo really operated — the unreasonable sales quotas, daily micromanagement, routine firings, employee hazing and so on. One judge noted that Wells Fargo was "supposed to be a bank, not a used-car lot."

A smart lawyer couldn't have helped noticing that civil authorities always reached the conclusion that Wells Fargo management was the problem, not employees, and likely pointed that out to the boss. Yet one of the most stunning things in this OCC document is how so many people, including Wells Fargo staff, did try to get the attention of higher-ups.

As far back as 2007, an employee ethics hotline filled up with stories of bankers being forced to take action without their customers' consent to keep their jobs. Employees wrote complaints — lots of them — that were sent up the line to senior executives, too.

Does this 2010 note to senior management, including Tolstedt, from an employee sound like typical employee whining? "Surely, you must be aware that you will reach a sales number to be achieved that will force the staff to cheat to obtain it," an employee wrote to a boss. "You have reached that point."

Message sent. Nothing changed.

"Tens of thousands" of customers called to complain about what Wells Fargo bankers did without their consent, according to the OCC. Those calls didn't stop it.

In 2013, and obviously only after fed-up Wells Fargo employees contacted news reporters, the Los Angeles Times published articles that pulled the curtain back on a lot of these practices. And those didn't stop it.

All of this makes for a very memorable read, of a story I thought I knew well. So here in January, there's already one strong candidate for the must-read business story of the year.

Called "In the Matter of: Carrie Tolstedt et. al.," it's a free download from a U.S. Treasury Department website.

lee.schafer@startribune.com 612-673-4302