In my post, Non-Apology Apologies, Part 2, I briefly described Wells Fargo’s acceptance of responsibility but refusal to apologize for its fraudulent practices in creating accounts without customers’ authorization.
This post focuses on a point in a New York Times article that provides fascinating background relevant to lawyers, law professors, and law students.
Top executives at Wells Fargo had been aware of the fraudulent practices in their bank for years and instituted ethics training for employees to stop them from engaging these practices.
BUT management continued to harshly enforce sales quotas that employees said were unrealistic and could not be achieved without the fraudulent practices. An article in the Washington Post indicates that these practices are also common in “many of the nation’s largest” institutions noting, for example, that Citibank and PayPal were ordered to pay fines and refunds last year.
The NYT article includes statements from former employees indicating that the bank’s executives had to know about the pressure to commit fraud notwithstanding the ethics trainings and that the executives turned a blind eye to the fraudulent practices.
Perhaps top executives could assure themselves and others that the bank was being responsible by conducting the ethics training. And using sales quotas and incentives can be a very legitimate practice to achieve business goals. Perhaps the executives had no reason to know that the fraud was continuing despite the trainings. In that case, they might have felt that they had nothing to apologize for. From that perspective, the bank’s non-apology would have simply been the kind of tactic that companies have to use to get out of a legal jam.
Even so, Wells Fargo’s non-apology rings especially hollow when top executives continue to profit while it fired 5300 lower-level employees who were forced to manage and implement the bank’s pervasive fraudulent practices.
Carrie Tolstedt, the divisional senior vice president in charge of the banks where the fraudulent activity took place, retired from that position in July and “CEO John Stumpf called her a ‘dear friend,’ ‘role model’ and ‘standard-bearer for our culture.‘” She took with her $125 million in stocks and options. Wells Fargo could “claw back” $17 million, but that would still leave her with more than $100 million.
Last week, Mr. Stumpf testified before the Senate Banking Committee and, despite repeated apologies in that forum, senators from both parties – in a rare display of bi-partisanship – were extremely dissatisfied. Senator Elizabeth Warren, in particular, conducted a dramatic cross-examination culminating in her call for Mr. Stumpf to resign. She noted that he engaged in the common rhetorical tactic of “accepting responsibility” without taking appropriate actions. The video of excerpts of her examination in the preceding link is really worth watching.
Implications for Lawyers, Law Professors, and Law Students
There are some parallels for lawyers from this case that we should consider. Lawyers are required to behave ethically. Law students are required to take a course in legal ethics and in many states lawyers are required to periodically take CLE courses in ethics. Yet unethical behavior continues.
Presumably some unethical behavior simply is a reflection that there always are some people who will violate rules.
Some lawyers may find themselves in situations similar to the Wells Fargo employees, where they know what the ethical rules require but they are in situations where they are pressured by senior partners or clients to produce results that are hard to achieve without breaking the rules. More generally, lawyers may violate the rules due to various temptations, even though they know it is prohibited to do so.
This suggests that mere knowledge of the rules is not sufficient to prevent some violations.
Perhaps our ethics trainings should explicitly discuss why lawyers are tempted or pressured to violate the rules – and how to resist these temptations and pressures. Indeed, this could be a fruitful subject for simulations. I’d like to think that this would be effective in reducing ethical violations, though it is probably impossible to know.
I didn’t teach professional responsibility and I don’t know how law professors generally handle this (or not). Many of our negotiation courses include a unit on ethics.
In my negotiation course, I used Art’s study (with Jess Alberts) in which lawyers were asked to say what they would do in the hypothetical “DONS” case when a client asks a lawyer not to disclose material facts in a negotiation. I asked a series of questions paralleling some questions in the study, I reviewed the ethical rules, and I presented findings about why lawyers said that they would or would not comply with the client’s request. At the end of the discussion, I asked what difference (if any) it would make if the client was a major client who generates substantial ongoing business for their firm. This was my last question in that class and I regret that I never devoted the time to this question that it deserved.
Do any of you teach ethics in PR, Negotiation, or other courses? Did you discuss why lawyers break the rules and what they can do to resist the pressures and temptations to do so? What do you think is effective in increasing lawyers’ compliance with the letter and spirit of the rules?