Internal Docs Prove Wachovia Knew About Telemarketer Rip-Offs All Along

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]

“infoUSA Marketed Lists Of “Gullible” Seniors To Known Scammers, Wachvoia Processed The Unsigned Checks”
(Photo: Getty)


Edit Your Comment

  1. Lmam says:

    But government regulation is unnecessary because not only does market failure not exist, but if it does exist the market will correct itself!

    Yeah, that’s the ticket…

  2. beavis88 says:

    In college, my friends called this bank “Walkalloverya”. Apparently they were on to something.

  3. EricaKane says:


  4. bradanomics says:


  5. darkened says:

    Now if any one of us ran one of those companies that were the ones Wachovia did business with we’d goto jail for a long time. I bet you Wachovia will have no real repercussions except give back money they already made and earned interest in from their investments and still end ahead from where they were.

  6. NewYorkNewYork10001 says:

    When I used to work at the checkout of a local supermarket, we were responsible for making up any shortage in the receipts at the end of the day (yes, this was before the bar code scanners.)

    It would be so cool if those six to seven-figure salaried bank execs were forced to make up the difference out of their own pockets. How’s that for a great way to cut down on bank fraud?

  7. bohemian says:

    Nope a bank would never do anything wrong they don’t need any regulation.

    So did all regulation of banking and real estate get thrown in the trash back in 2000? It is like things that used to put the fear of god into banks and real estate agents are either not being enforced or are not even on the books anymore.

    People should forward a link to that news article to Waxman’s office. Because this really makes you wonder what federal regulators are doing about this kind of thing. []

  8. goller321 says:

    @darkened: Yup, god forbid corporate America is held to any standards. Knowingly put out defective tires that result in the death of families… walk away scotch free.

    I’m so freakin’ pissed Edwards dropped out!

  9. APFPilot says:

    Just so everyone knows they took this very seriously (from the NY Times Article):In a statement, Wachovia said: “Earning the trust of our customers is at the heart of what we do every day and we regret this situation occurred. We took this issue very seriously, and senior management, led by C.E.O. Ken Thompson, was actively involved in directing aggressive steps to correct the processes related to this situation. We are confident that the changes we’ve implemented will help protect our customers.”

  10. jaydez says:

    Wow. I’ve been a Wachovia customer (well Citibank, First Union, Wachovia) since 1996 and never had a problem with them. Up until now I though they were lesser of the evils of the big banks (Wachovia, Bank of America, Citibank). I guess I was wrong.

  11. SexCpotatoes says:

    Treason! Sentence is Death by Telemarketer.

  12. vastrightwing says:

    I’m sure they take this “very seriously”

  13. goller321 says:

    @bohemian: Watch “Secret History of The Credit Card”-

    Banks haven’t had ANY real regulation for decades. And with the scumbag Bush in office, since ALL of his appointees are members of the sectors they govern (and will go back to within a year…)over the last 8 years things have only gotten worse. Does anyone think it is a coincidence that all this crap is going on while he’s in office?

  14. CarlR says:

    “We are taking this very seriously and investigating exactly how we got caught so this does not happen again”.

  15. Saboth says:

    I had some fraudulent charges come out of my Wachovia account last year. $20 from some credit card company in CT that I’d never heard of. I filed a complaint, but they never would tell me the results of the investigation.

  16. Feminist Whore says:

    “the bank, in fact, solicited business from companies it knew had been accused of telemarketing crimes.”

    This is indicative of something that I think needs to be addressed when it comes to general scamminess…

    The way “legitimate” institutions do business with scammers. Like TV stations that air infomercials for products and services that rip-off consumers. Like hotels and resorts that accept money from high-pressure “workshops” which end up swindling the average joe and jane.

    I have a poll over in the forums about this topic if’n anyone wants to pop over and vote []

    What got me so riled up about the whole thing was when a friend of mine who answers the phones for our local “Call 12 For Action” dealy told me about a real-estate investment “workshop” that was operating out of the Phoenician Resort (fyi $600 a night lowest room rate) where they actually put in the contracts that there was a “100% No Money Back Guarantee”. Well, apparently many folks didn’t notice those 2 oh so important letters n and o. I read some of the paperwork from the case and it was both hilarious and outrageous. Hopefully, my friend is going to bring me some copies of a few of the files on Friday, because I know my anecdotes are poor evidence. Anyway, it seemed to me that the best recourse for those who were scammed was to take aim at the Phoenician. I think it’s outrageous that these entities can make money by renting space and/or airtime to fraudulent fraudy fraud-doers and have absolutely no responsibility for the outcomes simply because they have lawyered up some general disclaimer.

    For comparisons sake, the Phoenician cannot rent me a meeting room if I plan on inviting people to a junkie’s workshop where they can buy some heroin. [/rant]

  17. camille_javal says:

    Craaaaap. I’ve been with Wachovia for a while, and stuck with them – despite the fact that they charge a few annoying fees – because in situations both with my own and my parents’ accounts, when there were fraudulent charges, they were all over that within a few hours – I mean, within a few hours of the charge happening = I didn’t even have time to know anything had happened.

    I guess it’s because those fraudsters weren’t also account holders.

  18. Kos says:

    Does Wachovia actions violate Anti-Money Laundering and Know Your Customer regulationsand, if so, does anyone know the repercussions?

  19. WhaDa says:

    @darkened: This is why the people that run the company and the managers involved should be automatically eligible for jail time for their actions.

  20. darkened says:

    @Kos: At worst they’ll get some fines and take it seriously and do it again if it stands to make them more money than they will lose out on later.

  21. Chaosium says:

    @Lmam: Reality and dealing with banks other than The Bank of Mom and Dad are not Libertarian strong points.

  22. ionerox says:

    @Kos: the Customer Identification Program and Anti-Money Laundering fines are pretty steep- AmEx got slapped with a $65 million fine a few years back for being out of compliance with their BSA program.
    I don’t think CIP would apply, because if they’re holding luncheons for the company in question they obviously know who the customer is and have done the required paperwork on the company. However, there obviously was evidence of suspicious activity that would warrant filing an SAR under the Anti-Money Laundering and Wachovia’s disregard of internal reports suggesting that fraud was occuring might be setting them up rather nicely for a big ol’ fine. (I doubt they’d take away the bank charter… Wachovia is just too big.)

  23. Balentius says:

    @Chaosium: Actually, the main weakness in the Libertarian position is that the default assumptions are:
    1) Transparency in business (with no outside enforcement…)
    2) Intelligent individual decisions
    3) No large companies

    Which really causes a problem when we are talking about today’s business environment. I vote libertarian myself, especially for the local races, because I think that we could do a lot worse than to go in that direction. Unfortunately, articles like this demonstrate that there is a long way to go before a “true” libertarian society is possible…

  24. rbb says:

    No real surprises here. Wachovia was bought out by First Union, a bank whose customer service policy could easily be summed up by its initials “F” and “U.” No wonder First Union kept the Wachovia name and dropped its…

  25. econobiker says:

    Reading the receivership docs (link below) on one company shows what a bunch of scumbags the banks were dealing with:


    And this group guys even have the $3 million yacht – highly leveraged of course…

  26. mkguitar says:

    OK, so if I want to pull my money from Wachovia…where do I go?

    Don’t they all suck?

    If there is a more ethical bank- I’ll move my deposits over.


  27. Me - now with more humidity says:

    MK: Try a good credit union. We’re in two, and they’re so much better than the bigs.

  28. hypnotik_jello says:

    @mkguitar: The bank of hypnotik_jello is taking deposits now! Seriously though, you might try a local area bank.

  29. destijl says:

    Info about Suntasia:

  30. All you need to see to know they knew EXACTLY what was going on and how illegal it was is the quote: “There is more, but nothing more that I want to put into a note.”

    @mkguitar: Credit Union. :) (Consumerist Cliche #14)

    If you happen to be in North Carolina (where Wachovia is quite large), I recommend Self Help, which not only has Credit Union cred, but does urban redevelopment, financial education for low-income people, (good) mortgages to people who don’t qualify for mortgages through a trad bank, etc. It was apparently capitalized in 1980 with a bake sale out of the back of the VW bug of two law school grads. :) Today they’re enormous and they do SO much good.

  31. BoC says:

    I hate banks, just can’t stand’em!
    Gimme a shovel and man, I’ll plant’em!
    Six feet under, that’s where they belong,
    I Hate Banks is the name of this song!

    Mojo Nixon

  32. Empire says:

    @alphafemale: If you mean knowingly doing business with shady organizations (as in this Wachovia story), then I agree with you. But otherwise all of a sudden you become responsible for investigating every company that wants to put an ad on your station or rent a room from your hotel. That would be pretty burdensome.

    @Balentius: Actually, the main weakness in the Libertarian position is that its result would be children in threadbare clothes standing in the snow selling matchsticks to buy gruel. Libertarians are best suited to the position they currently hold: the people who try to hold the line so the liberals and conservatives don’t accrue too much power they shouldn’t have.

  33. ageshin says:

    Remember the Savings and Loan debacle of the Reagan era? This cost us around five hundred billion, and did in the savings and loan bank. This left the main banks, and one would think that the powers that be would re-establish strict regulations. But no, instead the big banks were given free rein to do what they liked in the world of finace. With no restraints greed takes over. So we are now facing the banking debacle, which will cost us xxx billions. What will be left. Co-ops, and under the bed.

  34. wachoviaslave says:

    I work for Wachovia and I don’t like it at all. We are similar to telemarketers with large goals that encourage you calling whoever drops as a possible “lead” to our computers. No matter how old they are. They want us to sell mortgages and loans to sometimes those who are between the ages of 80-90.. I cannot justify that. We are all pushed to the brink and it is horrible. We are a huge salesforce who preys on the innocent public.