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Feds order $5.4M whistleblower award to ex-Wells Fargo wealth manager

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Federal regulators announced the largest individual whistleblower award believed to be related to the Wells Fargo fraudulent accounts scandal and ordered the bank to pay $5.4 million in back wages to a former wealth manager in Los Angeles and to reinstate him.

The Occupational Safety and Health Administration said last week that the adviser has not been able to find another job in wealth management since he was let go in 2010. Few details, including the man’s name, have been disclosed. Separately, Financial Planning has learned that OSHA put Wells Fargo on notice that it is likely to order the reinstatement of a second whistleblower, retail banker Claudia Ponce de Leon.

The details of her case could provide a window into how the bank has treated other employees who alerted managers to widespread fraud in opening new client accounts.

To justify its September 2011 decision to fire Ponce de Leon, the bank claimed the Southern California bank manager drank excessively and engaged in other inappropriate behavior.

Three weeks before her termination, she called the company ethics line to report that bankers under her supervision in Pomona, California, were opening client accounts without their permission to meet sales goals. This was almost exactly five years before regulators fined the bank for opening millions of accounts nationwide on behalf of unsuspecting clients.

The Labor Department, in investigating Ponce de Leon’s complaint under whistleblower protection laws, found no evidence to support the bank's allegations against her. Last December, it put Wells Fargo on notice that it is likely to order the company to reinstate her, according to documents obtained by Financial Planning.

Such reinstatements are unusual, and could signal a more aggressive approach by the government to protect whistleblowers.

"It is rare" to see reinstatements, said William Black, a former bank regulator known for being among those who exposed the Keating Five savings-and-loan scandal in 1989. "Given the number of whistleblowers from the big banks and the incredible frequency of retaliation, we would know if there were any substantial numbers of reinstatement orders," said Black, now an associate professor of economics and law at the University of Missouri in Kansas City. Last year, he co-founded Bank Whistleblowers United, which advocates on behalf of industry employees who speak up about alleged wrongdoing.

Wells Fargo said in a statement that it has provided “rebuttal evidence” to the preliminary decision in the Ponce de Leon case. “We disagree with the findings and we will continue to defend ourselves to ensure all facts have been fully considered,” the bank said. "We take seriously the concerns of current and former team members.”

The OSHA decision, which runs 78 pages, is full of Ponce de Leon's handwritten notes on new client accounts that appear to be falsified. The notice also contains 20 pages of commendations Wells Fargo awarded to Ponce de Leon over six years, the last one of which it awarded six months before firing her.

Ponce de Leon deserved protection under the law when she "reported conduct that she reasonably believed amounted to bank, wire and mail fraud involving regarding at least three private bankers," Teri Wigger, acting assistant regional administrator in OSHA’s San Francisco office, wrote in the preliminary decision. "Preliminary reinstatement of Claudia Ponce de Leon is warranted," Wigger wrote.

Ponce de Leon's lawyer, Yosef Peretz, said he has provided a rebuttal to the bank's challenge. His client, who he said now works for another Los Angeles-area bank, did not want to be discuss the case, he said.

EVIDENCE OF RETALIATION OSHA did not release the identity of the Los Angeles-based Wells Fargo wealth manager, who the bank fired in 2010 after he blew the whistle on suspected fraud on the part of two bankers he supervised.

Although Wells Fargo says it will fight OSHA's decision in that case, too, the order requires the bank to rehire him in a comparable position "immediately." A spokeswoman said last week the bank had not yet done so. "The individual hasn't been reinstated. Wells Fargo is evaluating its options having just received the preliminary order," she said.

Wells Fargo admitted last year that it may have opened as many as 2 million accounts without the permission of customers and agreed to pay $185 million to authorities to settle the case. The bank's CEO, John Stumpf, resigned over the controversy, which had led to the firing of about 5,300 midlevel bankers nationwide the past few years. A Justice Department investigation of the scandal continues.

OSHA has come in for heavy criticism for alleged mishandling of Wells Fargo whistleblower cases. Former federal investigators claim that OSHA ignored complaints by Wells Fargo employees who tried to blow the whistle on the long-running fraud, a Financial Planning investigation revealed. Many cases have languished at OSHA for six or more years.

In response to concerns like these, former Secretary of Labor Tom Perez ordered a "top-to-bottom" review of the Labor Department’s whistleblower protection program last year. OSHA said in a statement that it "has been working diligently to streamline investigative processes to ensure that whistleblower complaints are resolved quickly and fairly."

To receive the broadest protection under the law, most financial services employees who report misconduct must file complaints with OSHA's Whistleblower Protection Program, which handles such complaints under 22 different statutes, including Sarbanes-Oxley and Dodd-Frank.

In the Ponce de Leon case, there is "reasonable cause to believe" that Wells Fargo retaliated against her when it fired her on Sept. 28, 2011, Wigger wrote in the OSHA decision.

Twenty-one days earlier, Ponce de Leon had called Wells Fargo's ethics line to report that one of the personal bankers she supervised allegedly filled out new client account forms using the Vermont Avenue address of a Los Angeles County building, nonworking phone numbers and email addresses that repeated across unrelated customer accounts.

In response, the bank painted Ponce de Leon as a manager who drank too much at a lunch with a banker she supervised and engaged in other unprofessional conduct. OSHA disagreed.

"While [Wells Fargo] claimed [Ponce de Leon] had a long, well-documented history of unprofessional conduct, the evidence does not support that assertion," Wigger wrote.

Wells Fargo provided the following statement about its overall treatment of whistleblowers: "If team members ever see activity that is inconsistent with our Code of Ethics and Business Conduct, we encourage them to report it immediately, and if a team member thinks that they or someone else has been retaliated against for reporting an issue, they should report it as soon as possible to our EthicsLine, HR advisor, employee relations or their manager. Wells Fargo will take measures to protect team members from retaliation."

However, Ponce de Leon and the Los Angeles wealth manager had followed closely many of the instructions outlined by Wells Fargo before they were terminated, OSHA found. A bank spokeswoman did not reply when asked to identify any whistleblowers the bank had protected.

After losing her job, OSHA said, Ponce de Leon wound up working for Nordstrom for nine months for $9.80 an hour before eventually finding work at another bank.

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