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Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy

Anyone who has worked in a company of any size knows it'd be down near impossible to know the inner working at all levels of the organization. So, yes, the guy is accountable and needs to lose his job. But the idea that he should go to prison for something like this is ludicrous.

rconti 10y ago
Prison may be a bit harsh. And in a vacuum, you're right. It would be somewhat unfair to drop the hammer, out of nowhere, on some unsuspecting CEO who just did "business as usual". But that's no excuse; it just means we need to create a culture where this kind of thing becomes increasingly unacceptable, so that in the future executives will know what's expecting of them, and what the consequences can be. The "unintended" consequences of unrealistic goal-setting should be patently obvious to anyone who's made it that far in business, and if it isn't, we should make it clear that it's something these people need to start thinking about. In the case of Wells Fargo, this went on for a LONG time, was well-known, frequently reported on, and had a number of whistleblowers. The CEO can't know what every last person in the organization is doing, but they should be incented to make it their business to a culture in place that doesn't permit this, nor the blacklisting of whistleblowers.
- henrikschroder 10y ago
  > The CEO can't know what every last person in the organization is doing, but they should be incented to make it their business to a culture in place that doesn't permit this Where I'm from, there's a group af crimes such that if an employee at a company does them, the CEO will absolutely go to jail, even if they knew about it or not. For example, if your company produces toxic sludge as a byproduct, and someone at the company dumps it in nature instead of properly taking care of it, it's jailtime. Unsurprisingly, compliance with some environmental protection laws are A+ at all companies. Personal liability works fantastically as a motivator for companies.
  - maxxxxx 10y ago
    Personal liability may also be good limiter for size of companies. If something is unmanageable, it should be split up.
  - tswartz 10y ago
    That's super interesting to hear. Can you provide any links to good articles on the topic? This type is reform is something that I think would improve the banking system. In theory, this keeps CEOs from pleading ignorance as an excuse.
  - brazzledazzle 10y ago
    I thought they only have to demonstrate that they took reasonable measures (training, checks and balances, culture, etc.) to prevent an employee from doing something like that. Being a CEO without that protection would be scary.
  - jnbiche 10y ago
    > For example, if your company produces toxic sludge as a byproduct, and someone at the company dumps it in nature instead of properly taking care of it, it's jailtime. That's a kind of criminal collective responsibility, which I find repugnant whether it's a mother in Palestine being held criminally responsible for her son suicide bomber, or it's a CEO being held criminally responsible for the wrongdoings of some low-level employee that they did not direct and were even unaware of. Personal liability is arguably OK here, but criminal liability like you describe ("goes to jail") is most certainly not, and I'm surprised that there are so-called enlightened legal jurisdictions that do this.
    - anigbrowl 10y ago
      Strict liability is an old concept in law. I am not buying these claims of innocence involving a low level employee whose activities were not directed by the CEO; this fraud involved thousands of employees responding directly to a clear economic incentive that came down from the executive suite. You don't get to bring about that sort of situation and then disavow any knowledge of it. That's just an invitation to malfeasance. Look up the legal concept of Scienter - someone who knows or who should have known that fraud was taking place shares in the liability. I'm pretty sure the CEO of of a massive bank like Wells Fargo understands that sufficiently tempting/frightening economic incentives are going to drive employee behavior, just as they do consumer behavior.
- MaysonL 10y ago
  After the S&L crisis in the '80s, quite a few execs went to prison. The same should have happened after the latest crisis, but W's DOJ had reassigned all the fraud investigators in the FBI to anti-terrorism, and neither they nor Obama's assigned very many back. (As well as just not being willing to try to prosecute white-collar crime very hard – much rather get big headlines for big "settlements").
- bandrami 10y ago
  It would be somewhat unfair to drop the hammer, out of nowhere, on some unsuspecting CEO who just did "business as usual". I remember learning pretty early on that life is not fair, and later on that the justice system is not fair. But dropping the hammer is the only way that the business as usual stops being usual.
dangerlibrary 10y ago
Given the enormous scale of the fraud, someone should definitely be going to prison. "But my criminal organization is very large and not everything we did was illegal" is not an excuse.
- yummyfajitas 10y ago
  Enormous scale? The total fees from this fraud were $2.4 million. https://www.bloomberg.com/view/articles/2016-09-09/wells-fargo-opened-a-couple-million-fake-accounts https://www.bloomberg.com/view/articles/2016-09-09/wells-far... The "excuse" is that a bunch of employees did it against management's express instructions, and that management actually took action (albeit stupid ineffective action) to prevent it back in 2014. https://www.bloomberg.com/view/articles/2016-09-19/tough-targets-and-short-term-projects https://www.bloomberg.com/view/articles/2016-09-19/tough-tar... This is not something that was remotely profitable for WF, this was employees lying to WF to hide the fact that they didn't meet their goals.
  - anigbrowl 10y ago
    I should have known you'd show up with some bullshit misdirection. The scale of the fraud is enormous because it involved millions of accounts. That means millions of individual decisions to misuse customers' accounts for personal profit. The fact that it generated very little income for WF just means that it wasn't a very successful fraud. You don't get to evade criminal liability by saying that your criminal enterprise worked poorly and failed to run an impressive profit. management actually took action (albeit stupid ineffective action) Having instituted the policy to begin with, and with the knowledge of how such policies incentivize people, the management bears responsibility for not only the original problem but the ineffectiveness of the subsequent response. The CEO and his peers aren't some clueless kids that got into the C-suite and pushed random buttons on some big control panel, they're experienced managers with a deep knowledge of economics and institutional dynamics...in fact I'm probably selling them short, I'm sure their resumes tell a much more impressive story about their capabilities. So since they were good enough to hire into senior positions, they are surely good enough to take on the responsibility for the highly predictable outcome of their decisions.
bsder 10y ago
> But the idea that he should go to prison for something like this is ludicrous. Fine. Then the company should get the "death penalty" and be liquidated. Especially for something like the banking sector where the federal government could replace a bank almost instantaneously, the "death penalty" should get dropped on companies that engage in malfeasance.
- enraged_camel 10y ago
  >>Fine. Then the company should get the "death penalty" and be liquidated. Exactly. After all, corporations are people right? So let's actually treat them like we treat people.
  - conanbatt 10y ago
    You kill people that rob other people? Where are you from?
    - frgtpsswrdlame 10y ago
      Perhaps we should just ban Wells Fargo from business for a couple of years then, equivalent to a prison sentence.
      - conanbatt 10y ago
        So you would fire 260k+ people from one day to another? Thats pretty cold.
      - deleted 10y ago
        [deleted]
      - qohen 10y ago
        * Perhaps we should just ban Wells Fargo from business for a couple of years then, equivalent to a prison sentence.* The state of California did something like this, suspending Wells Fargo from bond-investment work, at the end of September: https://www.bloomberg.com/news/articles/2016-09-28/california-suspends-wells-fargo-from-state-bond-investing-work https://www.bloomberg.com/news/articles/2016-09-28/californi...
45h34jh53k4j 10y ago
Prison. RICO act for running a large criminal enterprise that defrauded millions. Any other industry fraud at this scale would see the dismantling of the enterprise!
qq66 10y ago
If the maximum penalty is losing one's job, the incentives are aligned towards maximum risk as losses are capped at zero. If prison is off the table, the fines need to be large enough so that the perpetrator loses all of his assets, savings, houses, cars, etc. and has to start again with a used Corolla and a studio apartment, since his Rolodex alone is worth millions.
amalcon 10y ago
The theory that someone is valuable enough to be worth the compensation packages given to leaders of this type of company, but not effective enough to prevent this sort of thing if they give it an honest effort, strains credibility. The theory that the incentive structure discourages that sort of honest effort is much more plausible. The correct response, if that's what's going on, is to change the incentive structure. Prison being what it is, I'd far prefer a way to do that without sending anyone there, but there does need to be some kind of consequence.
maxxxxx 10y ago
Considering that he makes a lot of money when things go right he should at least pay a lot of money when things go wrong. The reward structure is a little one-sided: * Things go well, CEO makes a lot of money and stays. * Things don't go well, CEO makes a lot of money and leaves.
anigbrowl 10y ago
Why not? The outcome was entirely predictable, and there is no way that a CEO of one of the country's largest banks doesn't understand the basic concept of economic incentives shaping people's behavior. Nothing personal because I'm sure you didn't intend to make things worse for everyone, but your attitude is exactly what's wrong with the US and with capitalism in general - the notion that once an organization is sufficiently large that it becomes hard to trace a chain of liability, then the liability must somehow evaporate and can't be assigned to any individual parties, but must be severally absorbed by the shareholders. Oh, but the shareholders think they don't bear any moral responsibility because it's an agency problem, they only vote on the candidates that the Board of Directors offer them for senior offices. Oh, but the board of directors can't be responsible because they're not involved in the day-to-day running of the bank...and so on. If corporate status is no more than a means by which to redistribute legal liability so thinly that none of it can accrue to any one individual, then the notion of corporate personhood is broken. I would remind you that the whole reason personhood exists in the first place is to make some sort of accountability possible, otherwise it would be virtually impossible to sue any officers of a company for lack of knowing who engineered a given policy that might form the basis of a legal complaint.
- forgetsusername 10y ago
  >Why not? Because prison is barbaric, and expensive and should be saved for hardened criminals. Nothing personal, but it's people like you who think throwing people in prison some kind of societal solution that we have overflowing prisons of petty criminals.
  - gizmo 10y ago
    Except that's not how prison exists today. You steal a TV you go to prison. You steal a car you go to prison. You defraud society to the tune of 500 million you pay a fine and you keep your life of luxury? The double standard is unjustifiable.
    - Trundle 10y ago
      Not familiar with "two wrongs don't make a right"?
serge2k 10y ago
If you can show knowledge of the illegal activity then why should prison be off the table? I suppose just making the fines high enough to actually punish the company should be enough.
criddell 10y ago
What about a massive fine? Enough to recover all of his bonuses and a good chunk of his salary during his time as CEO?
phs318u 10y ago
I believe a variation of that argument was used at Nuremberg.
- abraae 10y ago
  Godwin!
  - phs318u 10y ago
    Does calling "Godwin" mean we can't take any lessons from WWII or the Nazi era and apply them anywhere else at all? The poster I was responding to was effectively making the argument that superiors responsibility for the actions of their subordinates varies inversely as a function of organisation size. Clearly that's ludicrous. The executive are responsible for control structure, management methods, reporting lines, KPI setting, and verification processes to ensure that the above are working properly. Further, and more importantly they set the tone for the ethics of the organisation both by what they focus on and by what they ignore.
rhizome 10y ago
It's not ludicrous, and stating it without justification doesn't make it so. Prison is a penalty built into the law, the Sarbanes-Oxley Act. It's not just a bunch of jealous rabble clamoring for it.

rconti 10y ago

Prison may be a bit harsh. And in a vacuum, you're right. It would be somewhat unfair to drop the hammer, out of nowhere, on some unsuspecting CEO who just did "business as usual". But that's no excuse; it just means we need to create a culture where this kind of thing becomes increasingly unacceptable, so that in the future executives will know what's expecting of them, and what the consequences can be. The "unintended" consequences of unrealistic goal-setting should be patently obvious to anyone who's made it that far in business, and if it isn't, we should make it clear that it's something these people need to start thinking about. In the case of Wells Fargo, this went on for a LONG time, was well-known, frequently reported on, and had a number of whistleblowers. The CEO can't know what every last person in the organization is doing, but they should be incented to make it their business to a culture in place that doesn't permit this, nor the blacklisting of whistleblowers.

henrikschroder 10y ago
> The CEO can't know what every last person in the organization is doing, but they should be incented to make it their business to a culture in place that doesn't permit this Where I'm from, there's a group af crimes such that if an employee at a company does them, the CEO will absolutely go to jail, even if they knew about it or not. For example, if your company produces toxic sludge as a byproduct, and someone at the company dumps it in nature instead of properly taking care of it, it's jailtime. Unsurprisingly, compliance with some environmental protection laws are A+ at all companies. Personal liability works fantastically as a motivator for companies.
- maxxxxx 10y ago
  Personal liability may also be good limiter for size of companies. If something is unmanageable, it should be split up.
- tswartz 10y ago
  That's super interesting to hear. Can you provide any links to good articles on the topic? This type is reform is something that I think would improve the banking system. In theory, this keeps CEOs from pleading ignorance as an excuse.
- brazzledazzle 10y ago
  I thought they only have to demonstrate that they took reasonable measures (training, checks and balances, culture, etc.) to prevent an employee from doing something like that. Being a CEO without that protection would be scary.
- jnbiche 10y ago
  > For example, if your company produces toxic sludge as a byproduct, and someone at the company dumps it in nature instead of properly taking care of it, it's jailtime. That's a kind of criminal collective responsibility, which I find repugnant whether it's a mother in Palestine being held criminally responsible for her son suicide bomber, or it's a CEO being held criminally responsible for the wrongdoings of some low-level employee that they did not direct and were even unaware of. Personal liability is arguably OK here, but criminal liability like you describe ("goes to jail") is most certainly not, and I'm surprised that there are so-called enlightened legal jurisdictions that do this.
  - anigbrowl 10y ago
    Strict liability is an old concept in law. I am not buying these claims of innocence involving a low level employee whose activities were not directed by the CEO; this fraud involved thousands of employees responding directly to a clear economic incentive that came down from the executive suite. You don't get to bring about that sort of situation and then disavow any knowledge of it. That's just an invitation to malfeasance. Look up the legal concept of Scienter - someone who knows or who should have known that fraud was taking place shares in the liability. I'm pretty sure the CEO of of a massive bank like Wells Fargo understands that sufficiently tempting/frightening economic incentives are going to drive employee behavior, just as they do consumer behavior.
MaysonL 10y ago
After the S&L crisis in the '80s, quite a few execs went to prison. The same should have happened after the latest crisis, but W's DOJ had reassigned all the fraud investigators in the FBI to anti-terrorism, and neither they nor Obama's assigned very many back. (As well as just not being willing to try to prosecute white-collar crime very hard – much rather get big headlines for big "settlements").
bandrami 10y ago
It would be somewhat unfair to drop the hammer, out of nowhere, on some unsuspecting CEO who just did "business as usual". I remember learning pretty early on that life is not fair, and later on that the justice system is not fair. But dropping the hammer is the only way that the business as usual stops being usual.

dangerlibrary 10y ago

Given the enormous scale of the fraud, someone should definitely be going to prison. "But my criminal organization is very large and not everything we did was illegal" is not an excuse.

yummyfajitas 10y ago
Enormous scale? The total fees from this fraud were $2.4 million. https://www.bloomberg.com/view/articles/2016-09-09/wells-fargo-opened-a-couple-million-fake-accounts https://www.bloomberg.com/view/articles/2016-09-09/wells-far... The "excuse" is that a bunch of employees did it against management's express instructions, and that management actually took action (albeit stupid ineffective action) to prevent it back in 2014. https://www.bloomberg.com/view/articles/2016-09-19/tough-targets-and-short-term-projects https://www.bloomberg.com/view/articles/2016-09-19/tough-tar... This is not something that was remotely profitable for WF, this was employees lying to WF to hide the fact that they didn't meet their goals.
- anigbrowl 10y ago
  I should have known you'd show up with some bullshit misdirection. The scale of the fraud is enormous because it involved millions of accounts. That means millions of individual decisions to misuse customers' accounts for personal profit. The fact that it generated very little income for WF just means that it wasn't a very successful fraud. You don't get to evade criminal liability by saying that your criminal enterprise worked poorly and failed to run an impressive profit. management actually took action (albeit stupid ineffective action) Having instituted the policy to begin with, and with the knowledge of how such policies incentivize people, the management bears responsibility for not only the original problem but the ineffectiveness of the subsequent response. The CEO and his peers aren't some clueless kids that got into the C-suite and pushed random buttons on some big control panel, they're experienced managers with a deep knowledge of economics and institutional dynamics...in fact I'm probably selling them short, I'm sure their resumes tell a much more impressive story about their capabilities. So since they were good enough to hire into senior positions, they are surely good enough to take on the responsibility for the highly predictable outcome of their decisions.

bsder 10y ago

> But the idea that he should go to prison for something like this is ludicrous. Fine. Then the company should get the "death penalty" and be liquidated. Especially for something like the banking sector where the federal government could replace a bank almost instantaneously, the "death penalty" should get dropped on companies that engage in malfeasance.

enraged_camel 10y ago
>>Fine. Then the company should get the "death penalty" and be liquidated. Exactly. After all, corporations are people right? So let's actually treat them like we treat people.
- conanbatt 10y ago
  You kill people that rob other people? Where are you from?
  - frgtpsswrdlame 10y ago
    Perhaps we should just ban Wells Fargo from business for a couple of years then, equivalent to a prison sentence.
    - conanbatt 10y ago
      So you would fire 260k+ people from one day to another? Thats pretty cold.
    - deleted 10y ago
      [deleted]
    - qohen 10y ago
      * Perhaps we should just ban Wells Fargo from business for a couple of years then, equivalent to a prison sentence.* The state of California did something like this, suspending Wells Fargo from bond-investment work, at the end of September: https://www.bloomberg.com/news/articles/2016-09-28/california-suspends-wells-fargo-from-state-bond-investing-work https://www.bloomberg.com/news/articles/2016-09-28/californi...

45h34jh53k4j 10y ago

Prison. RICO act for running a large criminal enterprise that defrauded millions. Any other industry fraud at this scale would see the dismantling of the enterprise!

qq66 10y ago

If the maximum penalty is losing one's job, the incentives are aligned towards maximum risk as losses are capped at zero. If prison is off the table, the fines need to be large enough so that the perpetrator loses all of his assets, savings, houses, cars, etc. and has to start again with a used Corolla and a studio apartment, since his Rolodex alone is worth millions.

amalcon 10y ago

The theory that someone is valuable enough to be worth the compensation packages given to leaders of this type of company, but not effective enough to prevent this sort of thing if they give it an honest effort, strains credibility. The theory that the incentive structure discourages that sort of honest effort is much more plausible. The correct response, if that's what's going on, is to change the incentive structure. Prison being what it is, I'd far prefer a way to do that without sending anyone there, but there does need to be some kind of consequence.

maxxxxx 10y ago

Considering that he makes a lot of money when things go right he should at least pay a lot of money when things go wrong. The reward structure is a little one-sided: * Things go well, CEO makes a lot of money and stays. * Things don't go well, CEO makes a lot of money and leaves.

anigbrowl 10y ago

Why not? The outcome was entirely predictable, and there is no way that a CEO of one of the country's largest banks doesn't understand the basic concept of economic incentives shaping people's behavior. Nothing personal because I'm sure you didn't intend to make things worse for everyone, but your attitude is exactly what's wrong with the US and with capitalism in general - the notion that once an organization is sufficiently large that it becomes hard to trace a chain of liability, then the liability must somehow evaporate and can't be assigned to any individual parties, but must be severally absorbed by the shareholders. Oh, but the shareholders think they don't bear any moral responsibility because it's an agency problem, they only vote on the candidates that the Board of Directors offer them for senior offices. Oh, but the board of directors can't be responsible because they're not involved in the day-to-day running of the bank...and so on. If corporate status is no more than a means by which to redistribute legal liability so thinly that none of it can accrue to any one individual, then the notion of corporate personhood is broken. I would remind you that the whole reason personhood exists in the first place is to make some sort of accountability possible, otherwise it would be virtually impossible to sue any officers of a company for lack of knowing who engineered a given policy that might form the basis of a legal complaint.

forgetsusername 10y ago
>Why not? Because prison is barbaric, and expensive and should be saved for hardened criminals. Nothing personal, but it's people like you who think throwing people in prison some kind of societal solution that we have overflowing prisons of petty criminals.
- gizmo 10y ago
  Except that's not how prison exists today. You steal a TV you go to prison. You steal a car you go to prison. You defraud society to the tune of 500 million you pay a fine and you keep your life of luxury? The double standard is unjustifiable.
  - Trundle 10y ago
    Not familiar with "two wrongs don't make a right"?

serge2k 10y ago

If you can show knowledge of the illegal activity then why should prison be off the table? I suppose just making the fines high enough to actually punish the company should be enough.

criddell 10y ago

What about a massive fine? Enough to recover all of his bonuses and a good chunk of his salary during his time as CEO?

phs318u 10y ago

I believe a variation of that argument was used at Nuremberg.

abraae 10y ago
Godwin!
- phs318u 10y ago
  Does calling "Godwin" mean we can't take any lessons from WWII or the Nazi era and apply them anywhere else at all? The poster I was responding to was effectively making the argument that superiors responsibility for the actions of their subordinates varies inversely as a function of organisation size. Clearly that's ludicrous. The executive are responsible for control structure, management methods, reporting lines, KPI setting, and verification processes to ensure that the above are working properly. Further, and more importantly they set the tone for the ethics of the organisation both by what they focus on and by what they ignore.

rhizome 10y ago

It's not ludicrous, and stating it without justification doesn't make it so. Prison is a penalty built into the law, the Sarbanes-Oxley Act. It's not just a bunch of jealous rabble clamoring for it.