17 April 2018

Wells Fargo lawsuit alleges client overcharging

Wells Fargo has defended a lawsuit against a former employee claiming wrongful termination and client over-charging.

Ken Wolter

Wells Fargo is defending a suit against Simon Fowles, one of four currency traders fired last October, alleging his termination was because he planned to complain to regulators about the foreign exchange desk's incentive-pay system. He believed pay incentives could have led to foreign-exchange overcharges. The US Department of Justice was investigating the pricing of $4-billion Burger King currency trade as well as allegations the bank did not share the additional revenue properly with their client.

Bank denial

According to the lawsuit filed in Superior Court in San Francisco, Mr. Fowles said he planned to tell the investigators that the compensation system, which provided biannual cash payments for exceeding revenue targets, could result in fraud and clients being overcharged. Mr Fowles alleged he 'made it very clear he intended to inform federal regulators of the significant ethical, legal and regulatory issues' he had complained about internally. In a statement, Wells Fargo spokesman Ancel Martinez said the bank 'strongly denies the allegations in the complaint and will defend itself vigorously in court.'

Many charges

The suit is the latest in a number of legal charges against the bank, though this takes its problems onto its commercial side. In 2016, Wells Fargo settled a $185 million settlement with regulators related to unauthorised accounts. In February, the Federal Reserve hit the bank with a new enforcement action, ordering Wells Fargo to cap its growth while it improves its governance practices. Reporting its first quarter financial results last Friday, the bank said it expects another big bill from Federal regulators seeking $1 billion in civil penalties for overcharging tens of thousands of customers for improper mortgage fees and unneeded insurance policies.

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