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Beginning in 2002, Wells Fargo began opening fraudulent accounts for unsuspecting customers. Stakeholders at every level either participated in, ignored, or tolerated the bank’s behavior that defrauded consumers on a massive scale. These unethical and well-documented schemes spanned more than a decade. Using public sources, this case recounts the events and ethical lapses that unfolded over the multiyear investigation of the Wells Fargo fraudulent accounts scandal and illuminates the general systemic failures of corporate culture and governance, public regulation, and market responses to promote ethical business practices. This case provides the opportunity to consider what means for fostering ethical conduct might exist if a corporation can be big enough and rich enough that civil, criminal, regulatory, and market forces cannot deter unethical corporate practices, and if the market does not punish the corporation for a culture that promotes fraud.

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Synopsis In the 1990s, Mike Flanagan foresaw video moving from analog to digital and developed an equipment rental business to meet the needs of the entertainment/media production industry. By 1996 he established a second company to offer training in the use of Avid, a digital video-editing program. Flanagan sold the rental business in 1998 and by 2002 expanded the training away from a business model to a full-fledged college business model. By 2014 what started as a successful training program developed into a negative interaction with the US Department of Education and Flanagan found himself being forced out of business. Research methodology This case was originally a client-based project conducted real time in an MBA-level marketing course at the Graziadio School of Business and Management at Pepperdine University. Relevant courses and levels The case is well suited for a variety of business and law courses that integrate ethical decision making in their curriculum at the undergraduate and graduate levels. The case allows for a greater understanding of the implications of managerial behavior tied to ethical beliefs and the possible outcomes that may result. It also allows for a stronger grasp of the integral nature of management, staff, consumers and outside organizations on the pervasive impact of non-ethical behavior. Last, this case creates a framework for students to assess how ethics influence managerial behavior that will affect an organization’s success. Theoretical bases What ethical duties and obligations does a business owe to its customers and other stakeholders? Is ignorance an excuse for failing to meet those ethical obligations?