Saturday, April 26, 2008

The Feds take Wachovia to the woodshed

In punishment for scheming with telemarketers to steal vast amounts of money from the accounts of thousands of victims, Wachovia will be paying nearly $145 million in fines and restitution. The bank supported the plundering in order to earn a substantial amount in fees, amounting into millions of dollars.

An earlier HingeFire article (see Banks Behaving Badly: Wachovia) outlines the scam perpetuated by the bank and telemarketers. Wachovia (WB) did not admit or deny wrongdoing as part of the settlement. In a statement, the bank said this "situation was unacceptable and we regret it happened."

The size of the penalties does not align with the obscene profits made by the bank in this telemarketer partnership scheme, which was fully supported by executives at Wachovia. The bank's actions were "part of a pattern of misconduct that resulted in" Wachovia collecting millions of dollars in fees, regulators wrote. Once again, a banking institution’s executives were not held criminally liable for their actions, and the penalties are a pittance when compared to the profits.

The settlement is disappointing because the victims do not automatically receive their money back. The duped, many of them elderly, will be required to file complex paperwork in order to claim their money. Many critics in Congress are demanding that the Office of the Comptroller of the Currency (OCC) directly mail checks to the victims, which was done in the past instead of requiring the account holders to file claims. The impacted account holders will have to submit forms through a complex bureaucracy. “Because many of the victims are elderly or poorly educated, it is likely many of them will stymied by these obstacles”, according to Rep. Edward J. Markey. This makes it likely that full compensation from Wachovia will never be paid.

While clearly this “settlement” takes Wachovia to the woodshed, the sting of the Federal switch will only last for a short period of time. After which the bank can romp, play, and continue to eat the candy it has stolen, while conniving its next scheme to slip a hand into the customers’ cookie jars.


GregB said...

The hits keep coming....

Feds look at Wachovia in drug money probe