Wachovia Pays $125 Million to End Federal Investigation for Telemarketer Fraud!

The Wachovia Corporation, the banking giant, has agreed to pay an estimated $144 million to settle federal accusations that it failed to block telemarketers who took advantage of thousands of elderly bank customers.

The federal Office of the Comptroller of the Currency said Friday that Wachovia, which is based in Charlotte, N.C., had improper relationships with four telemarketers and payment processors who maintained their accounts at the bank. The marketers obtained customers’ bank account information while selling vouchers for discount travel and groceries and other products.

The bank has not admitted any wrongdoing, but will pay up to $125 million in claims, $8.9 million toward consumer education programs and a $10 million fine.

According to the Charlotte Bizjournal: “According to documents obtained by the newspaper, other banks alerted Charlotte-based Wachovia about the activities. However, the Times says, internal memos show Wachovia continued to provide services to companies that helped take as much as $400 million from unauthorized accounts.”

“This situation was unacceptable and we regret it happened, ” a Wachovia spokeswoman, Christy Phillips-Brown, said. “We will work diligently to provide restitution to consumers affected by the situation and to educate consumers.”

She said the settlement was not expected to impact the company’s financial condition.

The Wachovia case, the subject of an 18-month investigation by bank regulators, involved the use of “remotely created checks,” which do not require a customer’s signature.

Regulators said telemarketers would call Wachovia customers, offer them medical discount plans or other services, obtain customers’ bank account information, create a check and withdraw cash from customers’ accounts.

Since the telemarketers and payment processors were Wachovia customers, they could deposit those checks into their own Wachovia bank accounts, allowing money to be withdrawn quickly from consumers’ accounts.

The government said a large percentage” of customers complained, saying they never authorized the payments, or did not receive the products or services offered.

Though the bank became aware of the situation. it “failed to take quick action to terminate these account relationships or otherwise correct the problem,” the O.C.C. said in a statement.

In fact an article posted on domainb.com states: Wachovia executives, when quizzed about the lawsuits, pleaded ignorance about the thefts. However, newly released documents from the lawsuit have now established that Wachovia was quite aware about allegations of fraud, but had in effect, chosen to solicit business from companies it knew had been accused of telemarketing crimes.

Wachovia, however, continued processing fraudulent transactions for that account, along with others, as the bank charged fraud artists a fee each time a victim spotted a bogus transaction, and demanded their money back via chargebacks. Investigators indicate that one company alone paid Wachovia about $1.5 million over an 11 month period.

Linda Pera, an executive who left Wachovia in 2006, wrote, “We are making a ton of money from them,” while referring to a company that was later accused by federal prosecutors of abetting in stealing up to $142 million.

Ms. Phillips-Brown said the bank was not directly involved in the telemarketing activity or soliciting of account information from consumers.

The government said many affected consumers have already received reimbursement payments. It said the companies involved were: Payment Processing Center; FTN Promotions; the Netchex Corporation; and Your Money Access.

As of Dec. 31, Wachovia had assets of $782.9 billion and market capitalization of $75.3 billion. The company (NYSE:WB) has 3,400 retail financial centers in 21 states.

COMMENTS: Now, as a business ethics speaker, here’s an ethics question. Do I report on this issue about Wachovia’s settlement related to (their non admission of guilt) telemarketing fraud – and by doing so risk not being hired by Wachovia in the future?

Damn right I do. Ethics are ethics and companies should work hard to have a positive ethical footprint. In this case, while Wachovia did not admit guilt, the writing is on the wall. A profitable, but likely unethical, part of their business was uncovered and has cost them. Although paying $125 million for something that reported generated more than $400 million from unauthorized accounts might not have been so bad…considering the time value of money.

Now the question is…wonder which other banking organizations use their client list to offer other services to unsuspecting customers? Frankly, I can understand offering services to expand your business…that’s just makes good business sense. However, offering the services using in-house support may be more acceptable than farming it out to outside telemarketers. After all, once data is shared outside of the organization issues of privacy may be breached.

ANY COMMENTS ARE WELCOME!

Meanwhile, Business Ethics Speaker – Chuck Gallagher – signing off…

Celebrity Medical Information for Sale – Could Bring Lawanda Jackson 10 Years in Prison

What do Britney Spears, Farrah Fawcett and Maria Shriver have in common? Any or all could have had their medical information leaked to the media.

A Los Angeles woman has been indicted for accessing the private medical records of celebrity patients at the UCLA Medical Center and selling information obtained from those files to a national media outlet.

Lawanda Jackson, 49, was indicted under seal on April 9. That indictment, which alleges one count of illegally obtaining individually identifiable health information for commercial advantage, was unsealed this morning.

Jackson, an administrative specialist at the UCLA Medical Center from 2006 until she was terminated on May 21, 2007, allegedly received at least $4,600 from the media outlet in exchange for providing the private medical information. The media outlet paid Jackson by writing checks to her husband, the indictment alleges.

Jackson, who faces a potential sentence of 10 years in prison if she is convicted of the charge, is expected to be arraigned on the felony count on June 9 in United States District Court in Los Angeles.

According to celebnews: “The hospital has a PIN number system that shows who is looking at medical records, but doesn’t have a system in place to stop people from looking at the records. While it would be great to be able to trust all of the hospital’s employees, someone like Lawanda Jackson might just sell the information if they need the money badly enough. The LA Times reports she was $37,300 in debt in 2001, when she filed for bankruptcy.”

“We are deeply troubled that a former employee may have illegally received payments from a news organization in exchange for providing personal medical information,” Dr. David T. Feinberg, the UCLA hospital system’s chief executive, said in a recent statement.

“Meanwhile, we continue to take steps to improve our staff training and information systems to further strengthen the confidentiality of patient records.”

According to cbc.ca: Jackson quit her job as an administrative specialist at UCLA last May 21 after learning she was to be fired.

UCLA also fired several other employees for peeking at psychiatric information about Britney Spears, 10 months after Jackson left the hospital.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt. Now, that said, as a business ethics speaker and writer about white collar crime, I would predict that Jackson will get prison time if convicted.

Every choice has a consequence. Every group I address as a speaker will be presented that simple comment. The facts are, your choices will either bring you negative consequences or positive results. It seems that Jackson’s choices were at best unethical and at worst will bring her a conviction and prison.

WHAT COMMENTS DO YOU HAVE ABOUT THIS INTRUSION INTO CELEB’S PRIVACY?

For now…Business Ethics Speaker – Chuck Gallagher – signing off…

Fake IRS Employee – Morgan Mayfaire a/k/a Elizabeth Valdo – Charged with Prepare Fraudulent Tax Returns

So it’s tax season, the time when all are required to file tax returns. You look for someone who can provide the service correctly. You want someone with experience, someone who knows the law. Hum… I guess a n IRS employee would do?

As it turns out, Morgan Mayfaire, a/k/a/ Elizabeth Valido, age 49, of Davie, Florida, was charged with thirty-five counts of making false and fraudulent statements and eight counts impersonating an employee of the United States. Great! Wonder how the folks who had her fill out their returns feel?

If convicted, Morgan Mayfaire faces a maximum term of imprisonment of 3 years and a $100,000 fine on each of the charges of fraud and false statements, and a maximum term of imprisonment of 3 years and a $250,000 fine on each of the charges of impersonating an employee of the United States.

According to the Indictment, Morgan Mayfaire prepared fraudulent tax returns at her residence in Davie, Florida for several clients. The clients paid Mayfaire a tax return preparation fee of 10% of the refund claimed on their federal tax returns. Mayfaire prepared tax returns and amended tax returns on Forms 1040 and 1040X in which she reported false medical expenses, taxes, charitable contributions, and employee business expenses. The false expenses and deductions listed on the returns resulted in approximately $472,904 in tax refunds to her clients.

NOTICE: If you hire a return preparer who charges based on the refund received…watch out. By any ethical standard you can think of – this is wrong and a clear indication that some sort of fraud is likely.

Moreover, according to the charges, Mayfaire falsely represented to her clients that she was an IRS employee, and, as such, knew ways to increase taxpayer deductions on tax returns that others were unfamiliar with. These false representations induced clients to hire her to prepare their tax returns.

While an indictment is not an indication of guilt, I have found as someone who speaks and writes about white collar crime, that most indictments result in a guilty verdict. As evidenced in the Wesley Snipes sentencing hearing, if convicted, this woman will go to jail.

YOUR COMMENTS ARE WELCOME!

Meanwhile, white collar crime speaker, Chuck Gallagher, signing off…