Wells Fargo is extending a 6-year-old fight with a sham-accounts whistleblower, despite a government order to immediately reinstate the former employee.

The San Francisco-based company’s move has drawn condemnation from investor and whistleblower protection advocates, who accuse the bank of flouting the law.

"They really want to be unaccountable," said Amanda Werner, campaign manager of Americans for Financial Reform and Public Citizen, which has been pressing Congress to hold new hearings into the phony-accounts scandal after the bank raised its estimate for how many customers were affected.

Claudia Ponce de Leon, a former Wells Fargo employee who blew the whistle on its sham accounts.
Wells Fargo's refusal to immediately follow an OSHA order to reinstate Claudia Ponce de Leon "shows that the [bank's] culture, which was dismissive to any type of laws, has not changed," said her lawyer.

Wells counters that the government order is preliminary and it will present new evidence during appeal to prove it is in the right.

The case matters because of what it says about Wells’ company culture, whether it has lived up to promises to protect its own whistleblowers and if it has, as it claims, taken stock of the mistakes it made and is working on fixing them.

At issue is the case of Claudia Ponce de Leon, an employee at Wells who was fired in 2011 three weeks after she called the company’s ethics line to report that colleagues were opening fake accounts in order to meet sales goals.

Wells maintains that Ponce de Leon was not fired because she blew the whistle on phony accounts, but because she engaged in inappropriate behavior.

“We have consistently defended the actions in this matter because we believe Wells Fargo acted within the law to address the team member's performance issues,” the bank said in a statement.

Ponce de Leon has denied the charges, and the Labor Department investigation that culminated in the order found no evidence to back up the bank’s allegations.

Instead, the Labor Department said that Wells promoted Ponce de Leon 10 times over the span of a decade and on June 11, 2011, the same month she reported sham accounts. Three weeks later, the bank fired her.

After appealing her termination to the department's Occupational Safety and Health Administration, the agency in July ordered Wells to rehire Ponce de Leon and pay her $577,000, in part in compensation for causing her "humiliation," "depression" and "social isolation."

The ruling was hailed by Sen. Elizabeth Warren, D-Mass., a member of the Senate Banking Committee, who called it the “right decision to hold Wells Fargo accountable for retaliating against this courageous branch manager.”

Though the ruling was preliminary, the Sarbanes-Oxley Act stipulates that such reinstatements must be honored immediately, even while they are in the process of being appealed. According to the regulations:

"Any preliminary order requiring reinstatement will be effective immediately upon the respondent's receipt of the findings and the preliminary order, regardless of any objections to the findings and/or the order."

Yet large corporate defendants have routinely refused to comply with these OSHA orders. Wells says it will not reinstate Ponce de Leon while it appeals the case to an administrative law judge at the Labor Department.

"OSHA's findings are 'preliminary' and were issued without a full evidentiary process," the bank said in its statement. "As just one example of this, none of the witnesses who offered statements in favor of Wells Fargo were interviewed by OSHA. Any final decision should take into account all of the evidence and witness testimony."

'Scorched-earth defense'

To critics, Wells’ decision to keep fighting is endemic of an organization that is not committed to protecting its whistleblowers. They note that Ponce de Leon is one of several whistleblowers the bank is currently fighting, at least three of whom were fired after reporting the creation of phony accounts. She is also one of just two recent Wells whistleblowers who have received a rare OSHA ruling in their favor.

When employers are "under a lot of scrutiny either through class actions brought by shareholders [or] ongoing investigations," said Jason Zuckerman, a whistleblower lawyer, "they feel they have to use scorched-earth defense tactics."

Yosef Peretz, the lawyer for Ponce de Leon, said his client was stunned that Wells didn’t comply with OSHA’s decision.

"She's very overwhelmed by this whole process," Peretz said, adding that he asked the bank directly to comply with OSHA's order. Wells' refusal "shows that the [bank's] culture, which was dismissive to any type of laws, has not changed."

While not commenting on this case specifically, Warren released a statement about Wells’ tactics more broadly.

"If Wells Fargo and its new CEO are serious about making things right after the bank’s massive fraud, they should stop making life harder for the customers and employees it has harmed,” Warren said. “They can start by immediately reinstating the workers the company illegally fired for having the courage to blow the whistle on its fraudulent practices. Wells Fargo’s continued attacks on its former workers is yet another reason why the Senate Banking Committee needs a hearing with Mr. Sloan.”

Wells Fargo CEO Tim Sloan is scheduled to testify before the Senate Banking Committee on Oct. 3.

For its part, Wells says it is committed to protecting its whistleblowers, but disagrees with the findings in this case.

"Our non-retaliation policy makes clear that no team member may be retaliated against for providing information about suspected unethical or illegal activities or possible violations of any Wells Fargo policies,” the bank said. “Wells Fargo will take measures to protect team members from retaliation."

Next steps

The battle over Ponce de Leon’s case now goes to a Labor Department administrative law judge.

Yet even if she prevails, she may not see much for her efforts, said Mike Delikat, a whistleblower lawyer, who is not involved in this case but whose firm, Orrick, includes Wells as a corporate client.

The Labor Department's administrative review board "has held that administrative law judges do not have the authority to impose monetary sanctions for failure to obey a preliminary reinstatement order. Thus, it remains unclear whether and how preliminary reinstatement orders will be enforceable either in court or before the Department of Labor," Delikat said.

Ultimately, either Wells or Ponce de Leon may move their fight to federal court.
Werner, the investor advocate, says the ongoing fight belies Wells’ claims that it has changed since the phony-accounts scandal came to light.

"By pulling all these tricks behind people's backs," she says, "it just show they are really about the bottom line."

Peretz says it shows the bank is not beyond using its "immense power" to "crush" individuals.

"For Wells Fargo to drop a few million to defend a case, it's nothing," he said, adding that he expects Wells could extend the six years that Ponce de Leon has already been fighting to as long as a decade. "For Ponce de Leon to go through this process for 10 years, it's devastating."

Ann Marsh

Ann Marsh

Ann Marsh is a senior editor and the West Coast Bureau Chief of Financial Planning. Follow her on Twitter at @Ann_Marsh.