It’s no longer a surprise to read about corruption in politics and by employees engaged in public or military service. I have already expressed my opinions in prior commentaries. Unfortunately, corruption is becoming more prevalent in commercial and industrial private enterprise.

Two recent media events demonstrated a trend for business executives and employees to commit fraud. This is not new as there have been major corporate fraud and class-action suits that have usually resulted in a slap on the corporate wrist by the Justice Department and a multi-million-dollar fine levied against the corporation by the Securities and Exchange Commission.

The only major corruption case in recent years that involved the top executives was the failure of Enron. The two principal executives were actually prosecuted and convicted of their crime. Since then there have been a number of class-action and SEC charges against major corporations that have only resulted in fining the corporation which only penalizes the stockholders, not the perpetrators.

The recent disclosure that Wells Fargo Bank had been defrauding their customers by opening unauthorized bank accounts and issuing unauthorized credit cards to meet sales quotas and bonus targets might charge the bank executives for the crime. The 5300 employees involved in this scheme over a period of five years were fired or forced to resign. Now they are pointing their fingers at their bosses who demanded that this new-account fraud be carried out at the risk of losing their jobs.

Under pressure for censure by banking regulators and the SEC, Wells Fargo negotiated a $185 million settlement with the U.S. Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. The bank is suspected of opening over 2 million faux accounts and issuing new credit cards in the name of existing customers without notice. These bank accounts and credit cards then carried bank charges to the customer without their knowledge.

The defrauded customers have filed lawsuits against Wells Fargo which will go to mediation under the bank’s contractual arrangement that customers cannot sue the bank without mediation. This gives most of the advantage to the banks in a dispute with customers as the defrauded party can only hope for reimbursement of the illegal fees charged, not any compensation for the fraudulent procedure or damage to credit rating.

After the media release of the customer fraud, several business commentators noted that fees Wells Fargo booked will are one of the reasons the bank survived the recent recession with better financial reporting than many of their competitors.

More than 2 million accounts, as many as 565,000 credit card accounts and a shocking 1.5 million checking and savings accounts might be involved in the bogus account scheme. Wells Fargo is in the process of notifying about 100,000 customers who paid fees to contact their local branch in order to determine refunds.

A televised interview by Jim Cramer of CNBC on September 13 with Wells Fargo’s
CEO, John Stumpf, asked questions about the corporate fine and the progress of processing refunds to defrauded customers. As suspected, Mr. Stumpf said, “There’s nothing in our culture, nothing in our vision” like this, in effect implying that the guilty employees had created the fraud to improve their earning capacity and be eligible for promotion.

That was a blatant excuse for what no doubt was an upper executive requirement for employees to boost the earning capacity of the bank and then expecting it to go unnoticed by hundreds of thousands of customers. The ensuing lawsuits to be filed by the discredited employees will no doubt point in the direction of executive decisions. Finally, those highly compensated officers might be brought to justice for their actions rather than escaping with the government fine levied on the corporation.

More questions will be put to Mr. Stumpf on September 20 when he appears before the Senate Banking Committee to explain this fraud. Sen. Elizabeth Warren expects some better answers.

The second business fraud which has been in the news for some time concerns Volkswagen cheating on their emissions tests. The international response to one of the largest automobile companies has been drastic for their business and will endure years of legal actions by consumers and regulators.

It also has forced shifting of the major corporate executives, but no indictments to date. However, the engineer who devised the equipment to falsify the admissions test has pleaded guilty and faces up to five years in prison and a $250,000 fine.

This case might lead to the Justice Department holding other Volkswagen employees personally and criminally responsible for producing about 500,000 cars that violated the emissions standard that they claimed.

It’s about time that these corporate frauds and corruption being treated as business as usual are regarded as the responsibility of executives. Just collecting fines from the corporation is not good enough to discourage this kind of business culture.