Wells, Again. This Time? Keeping Client Rebates

Even as Wells continues to run its two-page ads that explain how much it has changed, the more things remain the same. The latest ethical issue is Wells’ admission that it pocketed client rebates that the clients had coming from mutual funds. Under revenue-sharing plans that Wells had with mutual funds holding client investment funds, Wells was supposed to return those funds to the clients. For example, the Chattanooga Fire & Police Pension Fund board questioned Wells for months about its practices in the Wells institutional retirement and trust unit. Wells finally admitted the error to the board and refunded $15,000 of the $47,000 discovered to the Chattanooga pension fund.

Attributing the failure to return the rebates to clients, Wells explained that a “system set-up error” caused the mistake. Wells also acknowledged that other clients were affected. The Chattanooga fund has decided to fire Wells as its manager, “The Board has lost confidence that the answers provided by Wells to date are complete.” The Board also filed a whistleblower complaint with the SEC outlining its concerns about Wells and has filed a suit seeking an accounting from Wells. Because Wells has managed the Chattanooga fund since 2005, the rebates could be as much as $2 million. The Board of the Tennessee fund had a former SEC attorney conduct the investigation into the Wells management of the fund. The lawyer received four answers from Wells in asking the questions about the rebates:

1. That information was confidential and could not be disclosed.
2. That there were not rebates,
3. An acknowledgement of a problem and partial payment of $5,000
4. An admission of the set-up error and more rebate payments.

There’s that tangled wen thing again.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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