It may now be common wisdom that modern-day lawyers need to be almost as savvy in business as they are in law. However, the recent sham accounts scandal at Wells Fargo serves as cautionary tale against favouring building-block business wisdom over the backbone values of the legal profession. A report released by Shearman & Sterling this week has criticised Wells Fargo’s legal department over its handling of the highly-public fiasco, in which up to 2 million accounts were opened in the names of Wells Fargo customers without their consent.
‘Too focused’ on costs
Specifically, the report criticises Wells Fargo’s lawyers for failing to adopt a ‘big picture’ approach in their handling of the large-scale accounts sham and its associated fallout. The 113-page report, produced over the last six months and incorporating interviews with around 100 Wells Fargo managers and employees, accuses the legal department of being too focused on ‘quantifiable monetary costs’ associated with the scandal, rather than its broader implications. The report reads: ‘Confident those costs would be relatively modest, the Law Department did not appreciate that sales integrity issues reflected a systemic breakdown in Wells Fargo’s culture and values and an ongoing failure to correct the widespread breaches of trust in the misuse of customers’ personal data and financial information.’
A broader assessment of the risks associated with the scandal could have helped limit the detrimental impact on Wells Fargo’s customers and the eventual financial and reputational fallout for the company, the report argues. So far, Wells Fargo has sacked more than 5,000 employees in connection to the incident and has paid almost $200m collectively in fines and penalties to the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the Los Angeles city attorney.