Wells Fargo accused of new fake-accounts scam in lawsuit alleging racketeering, identity fraud

Bernard "Jay" Patterson had never done business with Wells Fargo, so when he received a statement for a checking account in his name, he had questions. And as a forensic accountant and certified fraud examiner who has applied his expertise in numerous lawsuits — including several involving the San Francisco-based bank — he knew where to look for answers.

A lawsuit Patterson filed Tuesday in California accuses Wells Fargo of creating fraudulent accounts for thousands of people, including many non-customers. Regulators fined the bank $3 billion in 2020 for creating millions of fake accounts to generate millions of dollars in fees and interest.

"Just as one Wells Fargo fake account scandal concludes, another emerges," the lawsuit alleges.

Patterson claims that Wells Fargo, working with a Sacramento credit reporting agency also named as a defendant, used fake and real personal-identification information to open unauthorized accounts. In Patterson's case, his real name and Social Security number were combined with faked driver's license data and a false birth date, the lawsuit alleges.

Opening the fake accounts allowed Wells Fargo to obtain confidential information from the Sacramento agency Early Warning Services, which gathers consumer and business banking information from nearly all U.S. banks and credit unions, according to the lawsuit filed in U.S. District Court in San Francisco. Early Warning is accused of providing fraudulent identity-verification services that gave the fake accounts "a false veneer of legitimacy."

Among the allegations in the lawsuit is that the bank used the accounts to secretly process electronic funds transfers in a money-laundering scheme.

Patterson, of Arkansas, is seeking class-action status in an effort to bring thousands of others into the lawsuit, which accuses Wells Fargo and Early Warning of offenses including racketeering in violation of the federal RICO Act. Patterson is seeking unspecified damages and a court order forcing Wells Fargo to destroy his and others' data, and to notify third parties that they received fraudulent information.

The lawsuit accuses Wells Fargo and Early Warning of profiting from their actions, but does not detail how. Wells Fargo said Wednesday it was reviewing the lawsuit, and declined to comment on it. Early Warning, co-owned by Wells Fargo and six other major banks, also declined to comment.

Purported victims' identity information and banking balance and transaction histories going back years are described as "valuable consumer data for Wells Fargo, which specializes in marketing its financial products to consumers."

The surprise bank statement Patterson received from the bank arrived as he and his wife were seeking a home mortgage and it advertised Wells Fargo's mortgage loan products, the lawsuit claims.

The lawsuit cited Wells Fargo's "history of abusing consumers" through the fake-accounts scandal resulting in the 2020 regulatory action and hundreds of millions of dollars in other settlements. The bank was also hit with a $1 billion fine in 2018 for mortgage and auto-loan abuses, and refunded tens of millions of dollars to customers that year over fees for "add-on" products, including pet insurance.

In June 2022, Patterson received a monthly checking account statement from Wells Fargo, for an account showing a $12 balance, the lawsuit alleges. He called the bank, and a staffer told him the account was opened three months earlier, then transferred him to a representative who said the bank would freeze the account, but did not provide further information, according to the lawsuit. A week later he received a letter from the bank acknowledging he had not opened the account, the lawsuit said.

Concerned about identity theft, Patterson began obtaining credit reports from agencies including Experian, Equifax, and TransUnion, and none showed a new account with Wells Fargo, according to the lawsuit. But when he pulled his report from Early Warning, he found that months before he received the checking account statement, Wells Fargo had used the account to process four electronic funds transfers, the lawsuit claimed. Those transactions had not appeared on the statement, the lawsuit alleged.

In March 2022, Wells Fargo used the account in Patterson's name to move $4,992 to an account at another bank where Patterson had no account, the lawsuit alleged. In April and May, Wells Fargo sought three times to transfer $5,000 from the Patterson checking account, but all failed to go through because of "insufficient funds," the lawsuit claimed. The bank reported the failed transfers — "derogatory statements that hurt Patterson's credit rating" — onto Patterson's credit report with Early Warning, the lawsuit alleged.

It was not until September that Early Warning corrected its credit report for Patterson, and by then, the agency and Wells Fargo had reported the insufficient-funds incidents at least 14 times, to at least five third parties, the lawsuit claimed.

Filed with the lawsuit are 54 purported complaints to the U.S. Consumer Financial Protection Bureau from March to June 2022 from people — two in California — reporting Wells Fargo opened unauthorized accounts in their names, with more than 40 alleging they had no pre-existing banking relationship with Wells Fargo. The lawsuit said the bank and Early Warning — which owns money transfer platform Zelle — have never told purported recipients of the fabricated consumers reports that the information they provided was false.