As if banks needed any more bad press: Wachovia Corp. is in the hot seat for shady deals it allegedly had doing business with telemarketers accused of stealing hundred of millions of dollars.
The fourth-largest bank in the United States is facing a lawsuit alleging it allowed a telemarketing scheme that eventually scammed consumers out of about $400 million. The New York Times writes, “Newly released documents from that lawsuit now show that Wachovia had long known about allegations of fraud and that the bank, in fact, solicited business from companies it knew had been accused of telemarketing crimes.”
In 2005, a Wachovia executive warned colleagues that one account used by telemarketers had drawn 4,500 complaints in just two months. The executive, in an email, wrote, “YIKES!!!!” But Linda Pera, a Wachovia executive, responded, “We are making a ton of money from them.” Pera left Wachovia in 2006, the Times writes.
The allegations are not connected to the bank’s securities firm, Wachovia Securities. Nonetheless, the firm’s president and CEO, Ken Thompson, sent out a company-wide email to employees, including the firm’s advisors. According to one Wachovia Securities rep with more than $500 million in client assets, Thompson acknowledged the negative publicity in the Times article, and said the bank was not directly engaged in the activity but that “weaknesses” in our process allowed the third-party processors into the system.
Christy Phillips-Brown, a Wachovia spokesperson, told Registered Rep., “We’re confident the changes we implemented will help protect our customers and other consumers. We also did conduct an investigation concerning the telemarketers, and we practically involuntarily closed our telemarketer and third-party payment processor accounts.” Further, Thompson’s email mentioned a new risk-management system to address the problems.
So how is this affecting Wachovia reps? Well, according to one advisor, you’ve got to just roll with the punches. “It’s not going to bother me in the least really. I came from a firm that was always in trouble—so I don’t think it will affect me,” he says, referring to his former employer. What’s more, because of his distance from the New York area, he says the Times article will likely not be read by his clients. In fact, he hadn’t heard of the news until reading Thompson’s mass e-mail.