GUEST BLOG: A FAILURE OF ACCOUNTABILITY: Wells Fargo Fraud Goes Unanswered As Washington Dithers by Darrell Whitman

September 5, 2017

In 2010, attorney Darrell Whitman became a Regional Investigator for the San Francisco Region Office of Whistleblower Protection Programs ("OWWP"), which was part of the United States Department of Labor's ("DOL's") Occupational Safety and Health Administration ("OSHA"). Beginning in 2011, Whitman and others in the San Francisco OWWP office complained that they were being hamstrung and short-circuited in their efforts to protect whistleblowers against perceived retaliation -- essentially being prevented from doing the job that they were being paid to do. In May 2015, Whitman was fired. How ironic that Whitman, an OWWP investigator charged with protecting whistleblowers from retaliation, found himself the victim of alleged retaliation by OWWP. In response to his termination, Whitman sued. See: "Darrell Whitman Petitions Attorney General Sessions About Wells Fargo Investigation" (  Blog, August 7, 2017).

NOTE: The views expressed in this Guest Blog are those of the author and do not necessarily reflect those of Blog.

Wells Fargo Fraud Goes Unanswered As Washington Dithers
by Darrell Whitman,

As the New York Times and other media reported Thursday, the investigation by Wells Fargo into its own banking practices has turned up another 1.4 million fraudulent accounts, this time created by signing up unwary customers to its on-line bill paying service. Altogether, that's at least 3.5 million fraudulent accounts identified by a self-interested internal company audit. It's not credible that this huge account fraud organized systemically across several consumer service operations could have been accomplished without the knowledge, if not the encouragement, of senior Wells Fargo managers and executives. Yet, to date, other than John Stumpf's leaving with a smaller than wished golden parachute, there has been no credible federal response to the mess.

While the media continues its slow drip of reporting on what appears to be criminal activity at Wells, there is only silence out of Washington and the Justice Department. A month ago, I wrote to Attorney General Jeff Sessions asking he confirm that the criminal investigation begun last September would continue and broaden to include the Occupational Safety and Health Administration, which failed to investigate and report the fraud at least as early as 2010. The silence to my request has been deafening, and it's now time to stop politely ringing the bell and knocking at the door and demand that Washington hold responsible officials at Wells and OSHA to account.

What we now know

According to a year-long examination by an army of reporters, headed by Ann Marsh, the Senior West Coast editor for Financial Planning, this is what we now know about Wells Fargo's 3.5 million fraudulent customer accounts:

  • Wells Fargo engaged in fraudulent customer account creation for almost two decades, beginning in the early 2000s.
  • Over this period, Wells fired more than 5,000 employees for their roles in these schemes, but rewarded local managers who encouraged, if not ordered, the fraud.
  • Wells senior management claims it was unaware of the practices until 2013, which is hardly credible as a Wells senior counsel in Los Angeles was made aware of employee complaints about the fraud as early as 2010.
  • OSHA began to receiving Sarbanes-Oxley complaints from Wells employees by 2010, if not earlier, but didn't investigate these complaints, resulting in OSHA failing to provide early notice to the SEC of the practices, or protect the employee whistleblowers.
  • Two complaints by Wells' employees Yesenia Guitron and Judy Klosek, filed in May 2010, were improperly ordered withdrawn by OSHA, notwithstanding evidence the complaints had merit and OSHA's failure to advise Ms. Guitron and Ms. Klosek of its intention to close the complaints without an investigation.
  • By withdrawing these complaints, OSHA relieved itself of the burden of notifying the SEC and Ordering Wells to reinstate the employees with back pay and benefits.
  • OSHA has a recognized pattern of failing to properly investigate complaints and report them to regulators, and until the scandal about Wells fraud became public in September 2016, OSHA had failed to find merit in any of the more than 60 complaints filed against Wells.
  • Despite the national publicity about Wells fraud and compelling evidence OSHA wrongly closed Ms. Guitron's and Ms. Klosek's OSHA complaints reporting it, OSHA has refused to admit its mistakes and stonewalled efforts to reinstate and complete the OSHA investigation in these cases.
  • After the glare of negative publicity spotlighted Wells fraud in September 2016, both the Justice Department and the Department of Labor announced investigations. But DoL quietly dropped its investigation in December 2016, once that spotlight faded, and a year later the DoJ won't confirm that its investigation continues.  

Why accountability matters

I doubt I need to persuade the readers of the BrokeAndBroker Blog that accountability matters. But let me put a finer point on it for emphasis. Accountability for protecting the nation's safety, health, and financial security matters because without it we suffer preventable injuries, deaths, and loss. It also matters because when there is no accountability, there will be those who seize on it to gain an unfair advantage making a mockery of the idea of rewarding good management. Most importantly, where accountability fails it undermines the rule of law, and if it fails repeatedly and for too long, it undermines the legal system and calls into question democracy itself.

In the case of Wells, the failure of accountability is breathtaking. Internally, Wells allegedly created a system where employees could report issues of fraud in management. Ms. Guitron, and at least 600 other Wells employees, reported fraud to this internal system, believing it would stop the fraud. But instead of stopping the fraud, it became a vehicle for identifying and attacking these employees.

Sarbanes-Oxley was adopted for the purpose of enabling federal regulators to hold companies like Wells to account when they engaged in fraud. It's good law, but it's being managed by bad government. OSHA, through its Whistleblower Protection Program, is tasked to act as a gate-keeper, screening employee reports of wrongdoing, and when they appear to have merit reporting them to Agencies authorized as regulators. But OSHA finds merit in less than 2% of its cases, meaning the canary is dead before they take it to the coal mine. Worse, by failing to investigate these cases, OSHA sends a clear message to scofflaw companies that they don't need to fear accountability, and to employees that they report wrongdoing at their own risk. All this drives down the notion of public responsibility, producing a wide-spread culture of corruption in government and in the business community it serves.

Even when fraud appears like a tidal wave, as it has with Wells, the DoJ and Congress act as if they never heard of it before, and approach it with fear and trepidation like an alien force. Crime is crime, whether it's committed on the street or in the corporate boardroom, and in a society devoted to equal justice under law we should expect criminal behavior will be aggressively pursued wherever it appears. The DoL's quiet abandonment of its investigation of the Wells-OSHA connection, argues DoL's leadership endorses the culture of corruption in OSHA that contributed to the fraud. The DoJ's stealth approach to its Wells investigation, argues that either the DoJ lacks the will and integrity to pursue the law, or that it wants to hide its lack of competency from the public.

Demanding accountability

I have direct personal knowledge of the Guitron and Klosek OSHA cases because I was the OSHA investigator ordered to withdraw them without an investigation in November 2010. I had been an OSHA investigator less than three months, and was given the cases with the order to close them by an attorney-supervisor who knew full well that would violate both OSHA Protocols and SOX regulations. This wasn't simply a case of a one off mistake, or a single bad manager, but came in the context of an OSHA mantra to limit or abandon investigations whenever the opportunity came, which specifically targeted SOX and Frank-Dodd complaints involving financial fraud.

When I complained in May 2014 to then Secretary of Labor Tom Perez about a "culture of corruption" in OSHA, I and my fellow attorney-investigators in OSHA Region IX were subject to a retaliatory investigation that resulted in a purge of all of us by the end of 2015. But it didn't stop there, and after purging Region IX, OSHA continued to attack attorney-investigators in its Whistleblower Protection Program, purging all but one of the attorney-investigators in Region X, which was one of the few OSHA Regions that employed attorneys as investigators. At this point, it's clear that a culture of corruption in OSHA not only exists, but dominates OSHA management.

Once my own role in the wrongful withdrawal of Ms. Guitron's and Ms. Klosek's complaints became clear, I had a responsibility as an attorney and as a citizen to take whatever actions I could to correct these mistakes. We're all human, and we all make mistakes. However, for some strange reason it seems federal bureaucrats check their humanity at the door of their offices and can't muster the courage to accept and correct mistakes made under their management. Instead of Harry Truman's "the buck stops here", these bureaucrats follow the rule that they never saw the buck, even if it was lying prominently on their desk.

Last week, the Government Accountability Project, the attorney for Ms. Guitron and Ms. Klosek, and I launched an effort to force OSHA to acknowledge their mistake and reopen these investigations. The significance of doing that would not only provide some measure of justice for these long-suffering former Wells employees, but would begin the process of dismantling the wall of denial about corruption in OSHA. With more than 60 other Wells whistleblower complaints, it likely a significant number were wrongly closed by OSHA, and reopening them would send a message to scofflaw companies that they could no longer count on OSHA to enable their bad behaviors. It would also support a call for a thorough DoJ investigation of Wells, and for a general reassessment by Congress of the Whistleblower Protection Program.

We invite you to join this effort by taking a few minutes to voice your support to the Director of the Office of Whistleblower Protection, Mary Ann Garahan, David Brewer, the Senior Investigator for the House Homeland Security and Government Accountability Committee, and/or your local Congressperson.


Darrell Whitman, Esq.

DARELL WHITMAN is a former Regional Investigator with the Occupational Safety and Health Administration's ("OSHA's") Whistleblower Protection Program. Whitman is a licensed attorney and also holds a Ph.D. in politics and public policy. Dr. Whitman is a founding member and a contributing editor to the Journal of Global Faultlines.  He is currently based in Chisinau, Moldova, where he is working on a book about post-Soviet Eastern Europe.

Also READ: "Darrell Whitman Petitions Attorney General Sessions About Wells Fargo Investigation" ( Blog, August 7, 2017)