Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Wells Fargo gets public whipping

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Wells Fargo museum in San Diego's Old Town State Park. Photo by James Ulvog.

Wells Fargo museum in San Diego’s Old Town State Park. Photo by James Ulvog.

The Wells Fargo CEO got a good whuppin’ yesterday. The Senators each took their turn striving for the lead quote in the evening news.

As usual, the comments on Twitter are entertaining. Deep thoughts range from wanting to throw all the bankers in jail to one person lauding one senator for having personally discovered and exposed the fake account fiasco. Really. One of the senators found this mess.

If your knowledge of Cold War history extends to knowing what a show trial is, ponder the visuals and theatrics of the hearing. As I browsed through my twitter feed looking at the linked photos, show trial is what came to mind.

9/20 – Wall Street Journal – Whipping Wells Fargo / The bank blundered, and the politicians will make it pay – Editorial provides valuable perspective. Opening paragraph brings together multiple ideas, which I’ll quote under fair use:

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Written by Jim Ulvog

September 21, 2016, 9:52 am at 9:52 am

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Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committee

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Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Before you tune in to the headlines generated by Senators striving for the best one-liner in hearings which will appear in the evening news, check out these background articles.

So far looks like there is stiff competition in the race for most outraged Senator. At the moment, Senator Warren is in the lead.

9/16 – CNN Money – Wells Fargo drumbeat grows louder. House launches investigation – The House Financial Service Committee will start hearings late in September. The Wells CEO has been called to testify.

The rhetorical trap already set by the minority chair of the Senate Banking Committee is that if senior management did not know this was going on then the bank is too big to manage. The choice, as she infers: senior management is complicit or the bank ought to be broken up.

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Written by Jim Ulvog

September 20, 2016, 12:33 pm at 12:33 pm

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Pondering on the Wells Fargo fiasco and more news

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Original finish on mud wagon used by subcontractor to Wells Fargo on San Diego-Julian run in 1870s. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Original finish is visible on mud wagon used by subcontractor to Wells Fargo on the San Diego-Julian run in 1870s. Lighter and cheaper than the Concord wagon, this was useful in desert and mountain areas. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Here’s a few articles that were interesting to me in the last two days about the Wells Fargo fiasco, previously discussed here, here and here.

  • First, a digression into the ethics and audit issues of systemic faking of accounts and coding diesel engines to cheat.
  • Next, pondering whether there will be any clawback of the $124M bonuses from the senior executive who managed the retail banking area.
  • Finally, two articles describing the DoJ opening a preliminary investigation.

9/14 – Prof. Mike Shaub at Bottom Line Ethics – Plausible deniability and the insulation of upper management – Prof Shaub ponders two fiascos in the news for the deeper ethical issues. Both the Volkswagon diesel engine scheme and the Wells Fargo fake account fiasco reflect poorly not only on the companies and their culture, but the state of ethics in business and our society.

We, collectively, need to grapple with those issues.

The article raises unsettling issues for auditors. Let’s ponder for a moment…How can we detect corporate cultures and entity tone-at-the-top environments which allow building a cheating code into the core operation of a company’s software? How can we detect an environment that incentivizes staff to cheat customers or risk losing their jobs for not hitting sales targets? Those are sobering questions.

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Written by Jim Ulvog

September 16, 2016, 8:05 am at 8:05 am

Ripple effects spread out from Wells Fargo fake account fiasco

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Concord stagecoach painted in Wells Fargo colors, housed at the Seeley Stable Museum Hazard Collection in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Concord stagecoach painted in Wells Fargo colors, housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Unlike nudging Libor or Forex rates, it is easy to grasp that it is wrong to open bank accounts without a customer’s permission. The ease of understanding the mess is why I think the Wells Fargo fiasco is growing rapidly.

Here’s my free tip of the day on how not to handle a crisis: don’t blame it on the employees who got fired for breaking the rules to meet sales quotes set by management. That is the current strategy of the CEO:

9/13 (in print edition on 9/14) – Emily Glazer (have seen her name a lot on this story) and Christina Rexrode at Wall Street Journal – Wells Fargo CEO Defends Bank Culture, Lays Blame With Bad Employees – In an interview with WSJ reporters on Tuesday, the CEO blamed the whole mess on misbehaving employees.  He insisted there were not any incentives to improperly open accounts.

In the same interview, he indicated the bank will end its sales quotas for customer-facing staff.

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Written by Jim Ulvog

September 14, 2016, 7:57 am at 7:57 am

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Followup on Wells Fargo opening accounts without customer permission

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Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

When the leading article from the Wall Street Journal mentioned earlier was placed on the front page of the print edition, the headline of

 Wells Fargo Fined for Sales Scam

was in type 0.4 inches tall. Yes, I measured it.

That is the largest font I recall seeing on the front page in a long time. Maybe I don’t pay enough attention to font size, but still, that is the largest headline I recall lately. Isn’t quite the way you want to get your name on the front page of the Journal.

Here’s another article from the WSJ and a discussion from Rumbi Bwerinofa. Also, a study that quantifies the damage caused to senior executives earnings from the stigma gained by having a scandal-tainted company on their resumes.

9/9 – Emily Glazer at Wall Street Journal – Next Test for Wells Fargo: Its Reputation – The fiasco of opening accounts in customers’ names without their permission is a story that could cause reputational damage. Article says analysts are concerned and bank execs are worried how much this will damage earnings.

Difference with this mess from other banking fiascos is that this one is easy to explain and easy to understand.

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Written by Jim Ulvog

September 13, 2016, 8:59 am at 8:59 am

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Roman denarius

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Silver Roman denarius. Photo courtesy of Adobe Stock.

Silver Roman denarius. Photo courtesy of Adobe Stock.

Let’s take a look at the Roman Denarius. I’ve taken an interest in ancient currency and monetary issues lately, particularly as it give some insight into biblical times.

So, you can go along with me on the journey, if you wish. As a simple start, let’s look again at Wikipedia. Took a previous look at the Denarius here and here.

From about 200 BC until about 64 AD the Roman Denarius was about 3.9 grams, at 95% or 98% purity.

There is a comment that Tiberius slowly increased the fineness to 97.5% to 98%.  Tiberius accumulated a hoard of 675 million denarii.

Nero, who reigned from 37 AD through 68 AD debased the gold aureus from 8.18 grams of gold to 7.27 grams.

Article says 25 silver denarii are equal to 1 gold aureus.

How much was a denarius worth?

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Written by Jim Ulvog

September 12, 2016, 14:58 pm at 2:58 pm

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Yet another banking fiasco – Opening two million fake accounts to meet sales targets

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Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Wells Fargo Concord stagecoach. Notice the only suspension for running over rough roads is those leather straps under the passenger compartment. Those didn’t smooth out the rocks and bumps very much. April 2012 photo by James Ulvog.

Deep sigh. Another banking fiasco hit the papers yesterday. The Wall Street Journal reported Wells Fargo to Pay $185 Million Fine Over Account Openings.

The bank will pay a mere $185M to settle claims brought by OCC, CFPB (Consumer Finance Protection Bureau, the new creation of the Dodd-Frank legislation), and LA city attorney.

This scheme involved customer-facing employees opening fake bank accounts in the name of existing customers without the customer’s permission. Another variation is opening a fake account in the name of a nonexistent customer. Article says sometimes money would be transferred from a customer’s account into the new, fake account with occasional NSF fees because there wasn’t enough money in the legitimate account to cover legitimate checks.

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Written by Jim Ulvog

September 9, 2016, 8:30 am at 8:30 am

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