Corporate Governance

From the Pages of The Pomerantz Monitor: Wachovia Bank Fined for Aiding and Abetting Telemarketing Scam

By Carolyn Moskowitz

Readers of the June issue of The Pomerantz Monitor learned of unconscionable telemarketing scams aided and abetted by Wachovia Bank, the nation's fourth largest bank. In February, Wachovia first announced that it was the subject of an investigation by the Treasury Department into its involvement in telemarketing fraud schemes. A lawsuit in Pennsylvania alleged that Wachovia allowed telemarketers to steal millions of dollars from unsuspecting victims, many of them elderly. The scammers would phone Wachovia customers, offering vouchers for discount travel, medical services, or various other products, and then have "payment processors" create authorized, unsigned checks to withdraw funds from the victims' Wachovia accounts.

Wachovia  claimed ignorance of the fraud; but the NYT quoted internal documents showing that people high up in the company were not only aware of it, but actually solicited business from companies they knew had been accused of telemarketing crimes. Why, you ask? Wachovia made millions of dollars from the scams, by charging the fraud artists large fees when customers complained and checks had to be refunded.

On April 25 the other shoe dropped, when the Treasury Department announced that Wachovia had agreed to pay up to $125 million in restitution to consumers, plus $9 million for "consumer education programs" and a $10 million civil penalty. "This situation was unacceptable, and we regret it happened," said a Wachovia spokesman. We certainly hope they do.

Full post as published by PomTalk on June 17, 2008 (boomark / email).