A woman sued Wachovia last year because it allowed a telemarketing scam company to process stolen payments through its banks, despite complaints from customers and warnings from other banks and federal authorities. Wachovia said it had no idea what was going on, but now documents have been revealed that prove people high up in the company not only knew, but that “the bank, in fact, solicited business from companies it knew had been accused of telemarketing crimes.” Why? How about millions of dollars of extra revenue from steep fees whenever a fraud-related chargeback went through? The lawyers for the woman are now seeking class-action status for the lawsuit.
“YIKES!!!!” wrote one Wachovia executive in 2005, warning colleagues that an account used by telemarketers had drawn 4,500 complaints in just two months. “DOUBLE YIKES!!!!” she added. “There is more, but nothing more that I want to put into a note.”
However, Wachovia continued processing fraudulent transactions for that account and others, partly because the bank charged fraud artists a large fee every time a victim spotted a bogus transaction and demanded their money back. One company alone paid Wachovia about $1.5 million over 11 months, according to investigators.
“We are making a ton of money from them,” wrote Linda Pera, a Wachovia executive, in 2005 about a company that was later accused by federal prosecutors of helping steal up to $142 million.
Here’s another example of how Wachovia turned a blind eye to make extra money. A payment processing company called “AmeriNet” began processing fraudulent checks at Wachovia in 2003. That same year, an executive recommended the account be closed and wrote, “Keep in mind historically, telemarketing is an easy way to money launder and commit fraud. To knowingly bank a customer who is perpetrating fraud places the bank at great exposure.” Despite this, it wasn’t closed until 2005.
In late 2003, a Wachovia executive announced to colleagues via e-mail that her unit, because of AmeriNet, had seen “an increase in our annual revenue projection.”
Still not convinced Wachovia knew what they were doing? Here are more examples from the article:
- In 2004, Wachovia “held a lunch for the owner of a payment processor that the bank knew had drawn thousands of previous complaints.” The company was sued by the FTC last year for bilking $69 million from retirees and other victims.
- An internal Wachovia fraud investigator pointed out that Suntasia’s returned check rate was 79%, slightly higher than the 2.5% that regulators say indicates a high probability of fraud. Despite this, Wachovia continued to do business with Suntasia until the company was forced to close by a court order last year.
- Citizens Bank contacted Wachovia in 2006 and asked them to investigate a fraud-related account that was triggering high numbers of complaints from their customers. Wachovia left the account open until a court order forced it closed.
We get the feeling it’s going to be a lot harder for Wachovia to play the clueless card from here on out.
(Thanks to jbcrasher!)
“Papers Show Wachovia Knew of Thefts” [New York Times]