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Good to Bad Marcum LLP | Accountants and Advisors | New York, New Jersey, Massachusetts, Connecticut, Rhode Island, Pennsylvania, California and Florida Certified Public Accountants
Good to Bad

Good to Bad

What makes good companies go bad? Usually, it's the same thing that leads good people to go astray. Greed. One of the original and most enduring vices.

Over the past few weeks, leading to a grilling at Tuesday's Senate Banking Committee hearing, Wells Fargo became the latest example of corporate greed run amok. Dating back at least to 2011 (as far as anyone can tell so far), Wells created two million fraudulent bank and credit card accounts in its customers' names, in order to meet aggressive company targets for cross-selling new products. There were allegedly substantial incentives attached to those sales targets and extreme pressure on the front lines to meet them.

What were they thinking??? Of all the ways to bilk a customer and potentially set a company on the path to ruin, this is one of the worst I've seen in a long time. It is a wholesale violation of every conceivable fiduciary obligation and a straight-up breach of customer trust.

It makes me wonder what kind of thought, if any, went into setting the sales targets, and how upper management could possibly have been asleep at the switch. How did they think their people were going to be able to meet such apparently unrealistic targets without some kind of seriously "creative" sales tactics? The fact that the goals were being met on paper (through what appears to be some kind of internal control loophole) fed management's appetite for more. There's nothing wrong with reasonably lofty goals so long as you have accountability. But in this case, it was meet the goal, increase the goal. Meet the goal, increase the goal. It was a snowball gathering speed.

It's unfathomable to me that senior management did not have a clue about what was happening. Maybe that's why Wells Fargo caved so quickly in agreeing to pay $185 million of shareholder money in fines. They got caught red-handed with their fingers in the customer cookie jar.

Then leadership turned around and fired more than 5,000 lower level employees. To date, there haven't been any personal repercussions for the senior execs who benefitted handsomely from the company's strong financial performance while the fraud was in play and created the atmosphere and culture that allowed it to happen in the first place. In fact, CEO John Stumpf has so far steadfastly refused the idea of claw backs.

At the hearing on Tuesday (the first of many, I'm sure), Stumpf apologized for failing to "fulfill our responsibility to our customers, to our team members, and to the American public." Nice of him.

He was grilled by senators on both sides of the aisle. Elizabeth Warren (a Democrat) told him to his face that he should resign and face a personal investigation. She described the lack of oversight as "gutless leadership." Richard Shelby (a Republican) said Wells had "a corporate culture that drove 'team members' to fraudulently open millions of accounts using their existing customers' funds and personal information without their permission." It's one thing to have a vision of growth with strategy and accountability behind it; it's another to have a culture of fear and "profit above all" that drives your people to commit wholesale fraud.

Wells Fargo was one of the most respected financial firms on Wall Street. They'll be lucky to come out of this PR and regulatory crisis in tact (although I did read a comment from one bank analyst who said that while the controversy would damage Wells Fargo's reputation, it would be unlikely to do any real damage to its stock price. Unbelievable!). Arthur Andersen was considered one of the most, if not the most, respected accounting firms. As we know, Andersen is no longer with us. See what happens when a greedy corporate culture and an attitude of being untouchable corrupts the trusted customer/client relationship? Generally the fish stinks from the head down, which looks to be the case at Wells.

It demonstrates the extreme importance of leadership being hands-on with the business. The Ivory Tower (read: C-Suite) can be a very insular place if you don't make a practice of getting out there where your people are and interacting with your customers. Culture starts at the top. If leadership builds ethics and transparency into the culture, rank and file will follow suit.

Meanwhile, Wells Fargo's stock price rose on Tuesday (the day of the hearings) and is only down by about $1 since then - go figure. But that's a whole other discussion.

Ron Storch contributed to this posting.


Look, Ma, No Hands! Marcum LLP | Accountants and Advisors | New York, New Jersey, Massachusetts, Connecticut, Rhode Island, Pennsylvania, California and Florida Certified Public Accountants
Look, Ma, No Hands!

Look, Ma, No Hands!

Today will go down in the calendar as one of the most momentous days of 2016. Yes, it is the day that proves we, here at Marcum, have lived to tell another tale about surviving the September 15 tax filing deadline. But it is also the day that the iPhone "hits puberty," as the New York Times put it. The long-awaited debut of the iPhone 7 is finally here.

Ok, so maybe it's not the biggest thing happening in your personal world, but even if you're a die-hard android fan (up until the recall of the Galaxy 7), you have to admit that every time Apple ups the game, the rest of the world stops turning for a minute to see what new features (or eliminations) are now going to rule the universe.

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Happy Fall Marcum LLP | Accountants and Advisors | New York, New Jersey, Massachusetts, Connecticut, Rhode Island, Pennsylvania, California and Florida Certified Public Accountants
Happy Fall

Happy Fall

Labor Day, the unofficial end of summer, has come and gone, and school is back in session, so it's time for Jeff to start writing again. For those of us who live in the Northeast, it was a spectacular summer weather-wise. I can count on one hand the number of rain days we had from Memorial Day to now. Many of us got an opportunity to take some time off, re-charge our batteries, spend time with family and friends, and enjoy what summer has to offer.

With vacation season now behind us, here at Marcum we are in the throes of one of our biggest tax deadlines of the year, September 15, with less than a week to go. Our team members are working incredible hours to meet and exceed our clients' expectations and to ensure that everything that needs to be filed by the deadline is done with time to spare. Just about every partnership and corporation with a December 31 year-end has an extended tax filing deadline of September 15; so you can imagine, based on the size and scope of our practice, the incredible amount of work that gets done leading up to next Thursday. And as soon as next week's deadline comes and goes, we'll roll right into the October 15 tax filing deadline for all our individual clients who are on extension, a significant portion of our client base.

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Summer Breeze Marcum LLP | Accountants and Advisors | New York, New Jersey, Massachusetts, Connecticut, Rhode Island, Pennsylvania, California and Florida Certified Public Accountants
Summer Breeze

Summer Breeze

Where does the time go? It seems like just yesterday we were returning from our holiday break, and here we are with our last column before our traditional summer hiatus. I've hardly had a chance to assemble my notes from last year's "what I did on my summer vacation." Nevertheless, summer 2016 is here. And do I love summer. So yes, this is it, my last column until September 9th, when we return after a well-deserved rest. Writing this column is both harder than you may think and at the same time unbelievably rewarding. Last week's column alone generated an avalanche of responses, both positive and negative, that I'm still working my way through.

But writing this column, which we started three years ago, is really one of the few ways many of you get to know me. As Marcum has grown, we have added both team members and clients, many of whom I don't get a chance to know personally and the vast majority of whom don't know me. This is one of the ways I attempt to connect with you and give you a glimpse into what's going on at Marcum, how I personally feel about significant current events and an occasional look into what's going on in the Weiner household. And the feedback for the most part has been gratifyingly favorable, although there's the occasional controversial topic (last week, for example) that really brings out some strong contrary positions and admonishments for mixing business and personal views. But we're all entitled to our opinions, and I welcome the feedback.

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The opinions expressed in this column are solely those of Jeffrey M. Weiner and do not represent those of Marcum LLP, its partners or its employees.

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