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Column: 'Yikes!' is only word for Wachovia Bank abuse

By Robert Trigaux, Times Business Editor
In print: Sunday, April 27, 2008

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In every industry, there are unwritten rules of the most fundamental conduct.

Restaurants: Try not to poison customers.

Hospitals: Try to make patients healthier, not sicker.

Banks: Try not to profit from taking money out of older people's accounts without their permission — and then giving it to conniving telemarketers, including one called Suntasia in Largo, right here in Pinellas County.

On Friday, North Carolina's giant Wachovia Bank — the No. 1 bank in the Florida market and best known among all big banks as the consumers' favorite for service — was publicly chastised and fined by regulators for violating that fundamental conduct.

Federal regulators, part of the U.S. Treasury Department, called the bank's actions "part of a pattern of misconduct that resulted in financial gain to the bank." Wachovia collected millions of dollars in fees as a result of the telemarketing schemes.

Appropriately contrite on Friday, Wachovia agreed to pay up to $144-million, including a $10-million fine, to reimburse account holders, end an investigation and settle allegations it failed to stop telemarketers from stealing money out of the accounts, often other banks, of thousands of elderly consumers.

The bank, regulators say, was too slow to block such actions of telemarketers and payment processors that kept their accounts at Wachovia. In sales calls, telemarketers would obtain people's bank account information, create a check and withdraw cash from their accounts. Many victims say they never approved such access to their accounts.

As is typical in these regulatory wrist slappings, Wachovia did not admit wrongdoing, but did issue a statement that the "situation was unacceptable" and "we regret it happened." The $800-billion-asset bank, based in Charlotte, N.C., says it has accounted for the settlement — meaning shareholders will feel little if any pain.

But there is a "yikes" lurking behind all this.

Look a little closer at documents from a recent lawsuit against the bank and we learn Wachovia apparently knew about these fraud allegations against its telemarketing customers. As reported by the New York Times, Wachovia even solicited business from companies it knew had been accused of telemarketing crimes. Internal Wachovia e-mails indicated "high-ranking employees" warned their peers of telemarketing frauds routed through the bank's accounts.

"YIKES!!!!" wrote a Wachovia executive in 2005, warning colleagues that an account used by telemarketers had drawn 4,500 complaints in just two months. "DOUBLE YIKES!!!!" she added, the New York Times reported. "There is more, but nothing more that I want to put into a note."

Had regulators not finally intervened, a "TRIPLE YIKES!!!!" was bound to be heard sooner or later.

Bottom line? Bank customers expect money they keep in an account at a major bank to be there unless they write a check on it, expressly preapprove a debit on the account for a specific reason or are charged a specific bank fee for a service. Nobody expects lowlife telemarketers to be empowered to siphon funds using checks never signed by the account holder but honored by a bank with the reputation of Wachovia.

Robert Trigaux can be reached at trigaux@sptimes.com.