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Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.
They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.
The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp., Bloomberg Markets magazine reports in its August 2010 issue.
This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers -- including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

Wachovia admitted it didn’t do enough to spot illicit funds in handling $378.4 billion for Mexican-currency-exchange houses from 2004 to 2007. That’s the largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S. history -- a sum equal to one-third of Mexico’s current gross domestic product.
“Wachovia’s blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations,” says Jeffrey Sloman, the federal prosecutor who handled the case.
Twenty million people in the U.S. regularly use illegal drugs, spurring street crime and wrecking families. Narcotics cost the U.S. economy $215 billion a year -- enough to cover health care for 30.9 million Americans -- in overburdened courts, prisons and hospitals and lost productivity, the department says.
“It’s the banks laundering money for the cartels that finances the tragedy,” says Martin Woods, director of Wachovia’s anti-money-laundering unit in London from 2006 to 2009. Woods says he quit the bank in disgust after executives ignored his documentation that drug dealers were funneling money through Wachovia’s branch network.
For the past two decades, Latin American drug traffickers have gone to U.S. banks to cleanse their dirty cash, says Paul Campo, head of the U.S. Drug Enforcement Administration’s financial crimes unit.
The bank didn’t react quickly enough to the prosecutors’ requests and failed to hire enough investigators, the U.S. Treasury Department said in March. After a 22-month investigation, the Justice Department on March 12 charged Wachovia with violating the Bank Secrecy Act by failing to run an effective anti-money-laundering program.
Five days later, Wells Fargo promised in a Miami federal courtroom to revamp its detection systems. Wachovia’s new owner paid $160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in 2009.
If Wells Fargo keeps its pledge, the U.S. government will, according to the agreement, drop all charges against the bank in March 2011.
No big U.S. bank -- Wells Fargo included -- has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again.
Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets, says Jack Blum, a U.S. Senate investigator for 14 years and a consultant to international banks and brokerage firms on money laundering.
The theory is like a get-out-of-jail-free card for big banks, Blum says.
“There’s no capacity to regulate or punish them because they’re too big to be threatened with failure,” Blum says. “They seem to be willing to do anything that improves their bottom line, until they’re caught.”
Wachovia’s run-in with federal prosecutors hasn’t troubled investors. Wells Fargo’s stock traded at $30.86 on March 24, up 1 percent in the week after the March 17 agreement was announced.
I am sure Wachovia knew what was going on,” says Marmolejo, who oversaw the criminal investigation into Wachovia’s customers. “It went on too long and they made too much money not to have known.”
At Wachovia’s anti-money-laundering unit in London, Woods and his colleague Jim DeFazio, in Charlotte, say they suspected that drug dealers were using the bank to move funds.
Woods, a former Scotland Yard investigator, spotted illegible signatures and other suspicious markings on traveler’s checks from Mexican exchange companies, he said in a September 2008 letter to the U.K. Financial Services Authority. He sent copies of the letter to the DEA and Treasury Department in the U.S.
Woods, 45, says his bosses instructed him to keep quiet and tried to have him fired, according to his letter to the FSA. In one meeting, a bank official insisted Woods shouldn’t have filed suspicious activity reports to the government, as both U.S. and U.K. laws require.
‘I Was Shocked’
“I was shocked by the content and outcome of the meeting and genuinely traumatized,” Woods wrote.
In the U.S., DeFazio, who had been a Federal Bureau of Investigation agent for 21 years, says he told bank executives in 2005 that the DEA was probing the transfers through Wachovia to buy the planes.
Bank executives spurned recommendations to close suspicious accounts, DeFazio, 63, says.
“I think they looked at the money and said, ‘The hell with it. We’re going to bring it in, and look at all the money we’ll make,’” DeFazio says.
DeFazio retired in 2008.
“I didn’t want anything from them,” he says. “I just wanted to get out.”
Woods, who resigned from Wachovia in May 2009, now advises banks on how to combat money laundering.
http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug
-cartels-admitted-in-wells-fargo-s-u-s-deal.html the past three years, hundreds of thousands of non-criminal immigrants have been subjected to excessively abusive treatment in for profit prisons run for the federal government by the Geo Group (GEO) and Corrections of America (CCA). Through its mutual funds, Wells Fargo is a major investor in the GEO, the nation’s second largest private prison company, and a minor shareholder in CCA, the largest.

These for-profit prison companies, which rely on billions of tax dollars as their primary source of revenue, have successfully lobbied federal and state governments to adopt and implement policies that have led to the incarceration of over one million immigrants over the past three years. Recent reports by the Houston Chronicle and PBS showed that excessive abuse of detainees is rampant across the increasingly privatized federal immigrant detention system.

Wells Fargo has also played a key role supporting GEO business ventures. http://prisondivestment.wordpress.com/campaign-resources/newss-release
s/october-national-month-of-action/] The GEO group operates prison facilities in Australia, The UK, South Africa, the US and Guantanamo Bay and Cuba. The GEO Group has been criticized for Failing to Vet Guards, sexual abuse against immigrant detainees and other abuses

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its lending practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs.

Baltimore mayor to ask that the court bar Wells Fargo from charging higher fees to black borrowers. Many of these borrowers paid more under the bank’s subprime lending program, designed for less creditworthy consumers, and are more likely to default on their loans.

In 2006, Wells Fargo made high-cost loans, with an interest rate at least three percentage points above a federal benchmark, to 65 percent of its black customers in Baltimore and to only 15 percent of its white customers in the area, according to the lawsuit. Similarly, refinancings to black borrowers were more likely to be higher cost than to white ones and to carry prepayment penalties.

The complaint requests unspecified damages to cover the diminished property tax revenues and higher costs that the city said it had incurred. Additional costs include those for fire and police protection in hard-hit neighborhoods and expenditures to buy and rehabilitate vacant properties.

Wells Fargo allowed mortgage brokers to charge higher commissions when they put borrowers in loans with higher interest rates than the customers qualified for based on their credit profiles. The bank also failed to underwrite mortgage loans to traditional criteria, the suit said, setting up the borrowers for default.

Half of the Wells Fargo foreclosures in 2006 occurred in census tracts with populations that were more than 80 percent black, the suit said. Meanwhile, only 16 percent of the foreclosures were found in tracts with populations that are 20 percent or less black. Figures for 2007 were similar.

John P. Relman, a lawyer at Relman & Dane in Washington, represents the City of Baltimore in its case against Wells Fargo. “Foreclosures have a more profound effect in minority communities because they are closest to the line of distressed neighborhoods in many cities,” Mr. Relman said. “That causes big problems for the cities, not just the lost income from taxes but also the long-term social costs. Programs are going to be needed to stabilize the communities to be rebuilt.”

The Baltimore complaint cited a 2005 study showing that foreclosures required more municipal services and higher costs. The study, commissioned by the Homeownership Preservation Foundation of Minneapolis, identified 26 different costs incurred by government agencies responding to foreclosures in Chicago and in Cook County, Ill., in 2003 and 2004. The analysis concluded that total costs reached $34,199 for each foreclosure.

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Wells Fargo routinely adds surprise charges to mortgages taken out by minorities, with many rates rising well above 10 percent. As of last week, the average mortgage rate in the nation's largest cities hovered around 6.5 percent, according to the Associated Press.

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the campaign dollars to members of Congress from banks and firms that have received billions via the Troubled Asset Relief Program,"

Lobbying costs 2011: $6,620,000 http://www.opensecrets.org/lobby/clientlbs.php?id=D000019743&year=
2011

Campaign contributions for 2012 campaigns: 252 contributions totaling $301,965 for election cycle 2012. 132 contributions totaling $161,753 Republicans; 120 contributions totaling $140,212. http://maplight.org/us-congress/contributions?s=1&start=01%2F01%2F
2011&end=12%2F09%2F2011&office_party=Senate%2CHouse%2CDemocrat%2CRepublican%2CIndependent&election=2012&string=Wells%20Fargo&business_sector=any&business_industry=any&source=All]

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90 page ruling from Judge William Alsup of the Northern District of California against Wells Fargo Bank, showing in detail exactly how the bank engaged in “gouging and profiteering” when it managed customer checking accounts. Nor is this one of those polite judicial rulings where the judge waits to the end to conclude whether or nor the defendant engaged in bad behavior. Judge Alsup is biting and nasty throughout his ruling, barely able to hold his disgust at what he concluded was a deliberate attempt by Wells Fargo to profit off a system that trapped customers into overdraft hell.

Prior to 2000, Wells Fargo did its best to minimize overdrafts in customer accounts. Its computers processed all credits to the account first, followed by ATM withdrawals and debit card purchases, followed by checks and then Automated Clearing House transactions (the ACH is used by banks to process debits such as PayPal charges or monthly mortgage or rental payments where the customer has agreed to an automatic debit). In every step, Wells Fargo used low to high sequencing.

Wells Fargo argued that these were best practices within the banking industry

Judge Alsup referenced several memos from management written in preparation for these changes, identifying the fee revenue to be generated as a result of them. The first change was expected to produce $40 million in additional revenue in the first year, and the second and third changes an additional $40 million.

Judge Alsup also found that the way this process was explained to customers was deliberately misleading. New clients were given the legal Customer Account Agreement, a 60 page brochure in single spaced, 10 point font, which explained on page 27 that Wells Fargo “may pay Items presented against your account in any order we choose.” When this was being distributed, Wells Fargo indisputably was already processing all debits on a high to low sequence after commingling, but the use of the word “may” left consumers thinking nothing had changed in the processing methods. The bank’s own executives testified at the trial that they did not expect customers to have time to read the 60 page CAA, or understand it even if they did.

Second, the bank gave customers an easier to understand document without the legal jargon of the CAA, in which there was no reference at all to sequencing, so that the marketing material obfuscated deliberately the reality of overdraft charges. Third, it was only after a customer complained vigorously enough about their own overdraft charges that Wells Fargo sent them a letter explaining the true nature of the high to low sequence and its consequences. Fourth, at no time was the existence of a shadow line of credit revealed to the customer, which meant that Wells Fargo purposefully approved transactions it knew would create multiple overdrafts, but never told the customer at the time that such overdrafts would result.

Judge Alsup concluded that it was impossible for any customer of Wells Fargo to control their balance and prevent overdrafts using the traditional checkbook balancing methods.

Judge Alsup concluded Wells Fargo engaged in unfair business practices under the California Business and Professions Code. The Code requires a business to operate in Good Faith and engage only in Fair Dealing, but Wells Fargo did neither when it reordered its sequencing of debits and then expanded the universe of possible overdrafts by commingling transactions and installing a secret line of credit. The bank also deliberately went out of its way to hide these practices from customers and confuse them about the overdraft process. This lack of appropriate information in the bank’s legal and marketing material meant that Wells Fargo deliberately deceived its customers into creating overdrafts. As such, under the Code, Judge Alsup found that Wells Fargo engaged in fraudulent behavior.

As injunctive relief, Judge Alsup ordered Wells Fargo to cease using high to low sequencing by the end of this year, and revert back either to low to high sequencing, or sequencing by chronological order, which is close to what the consumer uses. In terms of restitution, the law limits penalties to no more than the defendant has earned from its unfair business practices. Accordingly, Judge Alsup ordered Wells Fargo to return to its customers all overdraft fees assessed during the past 43 months, the period of time for which the court had access to data from the bank on its overdraft earnings. This will result in an estimated $203 million in repayments to be made by the bank to its customers.

We have seen how a large bank like Wells Fargo has put profit maximization as its greatest imperative, at the expense of its customers, and at the risk of acting in an unethical and fraudulent matter. Bank customers are no longer viewed as customers to be given a reasonable service at a reasonable price, but as revenue sources down to the microcosmic, one customer at a time level. It is not difficult to imagine that Wells Fargo nationwide has detailed internal information on the profitability of each one of the millions of people it calls a customer.

As Judge Alsup pointed out, the overdraft fee process became a big business at Wells Fargo – the largest source of revenue for Consumer Banking. These fees hit the bank’s poorest customers who could least afford $200 penalty charges, because they couldn’t afford the $2,000 minimum balance necessary to avoid being overdrawn. It is to the bank’s discredit that Wells Fargo specifically targeted these hapless customers, deceiving them in the process, and nurturing them along as continuing sources of revenue due to the simple fact that they could not possibly manage their accounts to avoid overdrafts.

In December, 2002, a class action suit was filed against Wells Fargo over the bank’s refusal to reveal the existence of the shadow line of credit to customers. This case - Smith vs. Wells Fargo Bank - was finally settled in May, 2007 before Judge Ronald Prager of the San Diego Superior Court. Judge Prager ruled that Wells Fargo must pay $20 restitution to all the customers of the bank who were granted a shadow line of credit, and to pay the plaintiff attorney fees.

Judge Alsup tells us what happened next: What Judge Prager did not know — since it only came to light in this proceeding — was that Wells Fargo paid merely $2080 to 166 claimants. This is not a typo. Barely two thousand dollars were paid to class members. By contrast, Wells Fargo agreed to pay Finkelstein and Krinsk [the plaintiff attorneys] $2.2 million in attorney’s fees and costs. http://agonist.org/numerian/20100812/the_checking_account_scam_how_wel
ls_fargo_gouged_its_customers]

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Originally posted by AnthonyT:
Hello,

That's just terrible.

Shameful.

Note that I am a private citizen and not a spokesman for Wells Fargo or its affiliates. My opinions are my own, and not representative of any company position or policy.



--Anthony

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Local democracy, including the "Occupy" practices of consensus and facilitation have their place. The "Occupy" groups illustrated the value of the use of direct democracy in small groups of people who created a community, and within that community committed themselves to respecting each other, and using the tools of direct democracy to educate and develop plans.

Few people in North America have had this type of experience. Certainly the practice of Liberal Democracy allows for only limited demonstrations of respect and exercise of the will of the whole community. Most people in Liberal Democracy limit their view of democracy to the resolution of conflict via the will of the majority. Purposely, ignoring the needs of the minorities, let alone respecting the minorities.

For me, it was wonderful to see the "Occupy" movement in action. Having been directly involved in organizations (activist groups and cooperatives) that have used similar consensus decision making tools, I have been exposed to both the strengths and weaknesses of direct democracy. Local democracy and the "Occupy" practices work best … well locally, … and in the context of a well defined community of like-minded people who are bound together by some type of core common vision/values and use the direct democracy tools to resolve differences, but successfully only differences that outsiders may consider relatively minor.

As the cooperatives and activist groups became larger, and the constituencies became more diverse, consensus decision making, in the practical application, tends to result in indecision.

So for big questions, big solutions, parliamentary democracy and its accompanying tools are needed … The bigger the democratic organization the more structured and disciplined the decision making process needs to be, if both a wide variety of voices and alternatives are to be heard … All of these tools work best when there is commonality of vision and world view, and when differences are respected or at worse tolerated.

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Originally posted by SignyM:
Niki2, I'd like to share some general observations of the Occupy movement from the far left. My email friends (as distinguished from my internet friends) are (mostly) a bunch of oldish student radicals and activists from the 60's and 70's... most of my email friends have pretty much "been there and done that, AND got the T-shirt and mug". Some of us have been in jail, others have traveled the world, still others of us have been in cooperatives, and ONE of us has been in cooperatives AND in government AND worked for (gasp!) big pharma. So, with permission, I am quoting one of my email friends. Having had a foot in so many worlds, I found this particularly enlightening...

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Local democracy, including the "Occupy" practices of consensus and facilitation have their place. The "Occupy" groups illustrated the value of the use of direct democracy in small groups of people who created a community, and within that community committed themselves to respecting each other, and using the tools of direct democracy to educate and develop plans.

Few people in North America have had this type of experience. Certainly the practice of Liberal Democracy allows for only limited demonstrations of respect and exercise of the will of the whole community. Most people in Liberal Democracy limit their view of democracy to the resolution of conflict via the will of the majority. Purposely, ignoring the needs of the minorities, let alone respecting the minorities.

For me, it was wonderful to see the "Occupy" movement in action. Having been directly involved in organizations (activist groups and cooperatives) that have used similar consensus decision making tools, I have been exposed to both the strengths and weaknesses of direct democracy. Local democracy and the "Occupy" practices work best … well locally, … and in the context of a well defined community of like-minded people who are bound together by some type of core common vision/values and use the direct democracy tools to resolve differences, but successfully only differences that outsiders may consider relatively minor.

As the cooperatives and activist groups became larger, and the constituencies became more diverse, consensus decision making, in the practical application, tends to result in indecision.

So for big questions, big solutions, parliamentary democracy and its accompanying tools are needed … The bigger the democratic organization the more structured and disciplined the decision making process needs to be, if both a wide variety of voices and alternatives are to be heard … All of these tools work best when there is commonality of vision and world view, and when differences are respected or at worse tolerated.

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Anyway...what I got out of this was

local issues = direct democracy. Big issues = representative democracy. Until the Occupy movement ALSO becomes engaged in representative democracy... politics... getting people in office who represent their viewpoint... they will be limited to local issues.

Direct democracy is a heady, powerful experience. For once, you get to make important decisions about real things, not just what kind of toilet paper to buy. But it is also limited, so you need to find appropriately-sized goals for your group in order to achieve success. Success will then build on success.

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Originally posted by Niki2:
The problem is, as it says, "Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again." That's all that ever happens...

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Originally posted by Niki2:
Geezer: This is going to be rough...want to answer your questions, but I'm pretty frazzled. Ran from wake-up until 3 or so, now I"m pooped. Let's see...

That's the best I can do...sorry it's rambling, but I'm POOPED and off to get some dinner.

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