A reporter tried for more than two years to speak with Michael Bacon, the megabank's former chief security officer. Bacon eventually sat for around 30 interviews, painting a detailed picture of the Wells executive suite as the fake-accounts scandal unfolded.
Transcript:
Kevin Wack (00:01):
Hi Michael, I'm a reporter with American Banker. You may have seen the article that I published on Friday. I'm continuing to report on the story and am interested in speaking to you confidentially.
I'm Kevin Wack, the national editor at American Banker, and this is Bankshot. Over the last week, American Banker has published a project of mine that was about three years in the making.
I write about a former Wells Fargo executive named Michael Bacon. Michael spent more than a decade at Wells. He became the bank's chief security officer, essentially the top cop inside a company with more than 200,000 employees. Michael was probably the loudest voice inside Wells calling for a crackdown on fake customer accounts. You remember the scandal.
News Clip (01:10):
Relentless pressure, unrealistic sales targets a culture built on selling as many products to customers as possible. Former Wells Fargo employees say that is what they faced on the job. Now, the bank ...
Kevin Wack (01:23):
Michael Bacon had access to executives at the most senior level of the bank, but no one was very interested in what he had to say. In fact, he was edged out of his job.
After he left Wells, Michael would become a government witness. He would provide valuable information about who knew what and when to the Department of Justice, the SEC and the Office of the Comptroller of the Currency.
Michael is the first high-level Wells executive to open up about what he witnessed in the boardroom. In my article, I tell the story of the fake-account scandal from his unique vantage point. And in this episode of Bankshot, I'm going to take you behind the scenes to show you how I came to tell Michael's story. It was a long, circuitous path — with some personal struggles of my own along the way.
Michael Bacon (02:10):
My name's Michael Bacon. I was the chief security officer and executive vice president at Wells Fargo up until September 2014, at which time I was displaced and started my own risk management firm. At Wells up until I left, I managed the corporate security program, which consisted of a number of divisions at any one time. Had 300-plus employees, but we had a really robust and comprehensive physical security program. We had two 24/7 security operations center programs. We had a project management team, and then we had a very robust and professional internal investigations team, which investigated code of ethics issues and internal fraud within Wells Fargo.
Kevin Wack (03:06):
I've been covering Wells Fargo for American Banker since 2012, and I've been covering the bank's fake account scandal since it broke open in 2016. But this story starts in January 2020.
I had just written an article about the possibility of criminal charges against former high-level Wells executives. After the article was published, I reached out to Michael. I'd never met him, and he hadn't given any interviews to the press about his time at Wells.
I crafted a short email and hit send. And then I heard nothing, which is not unusual. Reporters reach out all the time to people who have no interest in talking to them. As it turned out, I wasn't the first reporter to try to get Michael to talk.
Michael Bacon (03:47):
Once the Wells Fargo Board of Directors report came out in what, April 2017, I was inundated with reporters, individuals, some academic individuals, you know, all looking, assuming based on the board report that I had some insight and a story to tell. But at that time, I had retained counsel, and it just did not seem in the best interest of the judicial process that was pending to start talking. And it probably wasn't in my best interest at that time to start talking.
Kevin Wack (04:25):
A few weeks after I emailed Michael, I contacted one of his former colleagues on LinkedIn. This person agreed to talk to me off the record. When we spoke on the phone, I got the sense that he was feeling me out. I didn't know it at the time, but he would eventually be my conduit to Michael.
At the time I emailed Michael, he was a key witness for the government. Just 17 days later, the Office of the Comptroller of the Currency, or OCC, would file civil charges against a handful of former Wells executives. And its charging document would rely heavily on information from Michael. It showed that the government thought Michael had been telling the truth about certain senior executives.
Michael Bacon (05:05):
And I think if you look at the OCC charging documents, that's the gospel. These people all had jobs, and they didn't do them.
Kevin Wack (05:15):
About five months later, I was preparing to publish another article about the fake-accounts scandal. This one relied heavily on documents that had been made public as part of the OCC's case, including a partial transcript of Michael's deposition testimony. Again, I reached out to Michael for comment, and again I heard nothing.
Then in September 2021, the OCC's case against three former Wells executives went to trial. The first couple weeks of testimony were held in Sioux Falls, South Dakota, which is the headquarters city of Wells Fargo Bank.
Michael Bacon (05:47):
These are proceedings initiated by the Comptroller of the Currency, styled in the matter of Claudia Russ Anderson, former community bank group Risk Officer, David Julian ...
Kevin Wack (05:58):
I was excited to cover the trial in person — even with the COVID protocols that were in place. I'd been covering this saga for five years. The trial would be a chance to get out from behind my computer screen and make some face-to-face connections.
But a few weeks before the trial began, my plans changed. It was a Thursday morning, and I was working in my home office near Los Angeles when I felt my left arm go numb. I stood up immediately, felt dizzy and sank to my knees. My wife called 911. A few minutes later I was in an ambulance riding to Huntington Hospital in Pasadena.
(06:40)
I was 46 years old. I was otherwise healthy and I'd just had a stroke. Luckily, it was a small one, and I made a full recovery over the next couple of months. But I wouldn't be traveling to South Dakota.
A few weeks after I returned home from the hospital, I got a message on LinkedIn from Michael's former colleague, the one I'd spoken to a year and a half earlier. The message read "Kevin, it has been a while since we spoke. I was at Wells Fargo when you reached out to me. A friend of mine and yours asked me to reach out and get an email address for you. He will be at the trial next week. He can't speak with you until after, but he thinks you may be there."
Michael had been following my work. He wasn't planning to give me an interview in South Dakota, but he figured we could exchange pleasantries. I quickly wrote back: "Thanks for reaching out. I had hoped to be at the trial in South Dakota next week, but unfortunately I won't be able to make it. I will be following it from afar."
While I was at home, still recovering, Michael was preparing to testify in the government's case against his former colleagues. I recently asked him about the run up to the trial.
Take me back to Sioux Falls last year.
Michael Bacon (07:54):
I was told that I would be their number two or number three, that I was going to testify that day.
Kevin Wack:
That very day? The first day?
Michael Bacon:
The first day. It was never explained to me why I was upfront, but like you said in your article, I think the OCC was treating me as a pretty key witness. So I not only arrived at Sioux Falls thinking I was testifying that morning, we arrived to the interim courthouse and went through all the protocols. I expected to testify. We had to be out the overflow area. They didn't let anybody in, and so we were listening to it on a TV, or I had to listen to it. I went down the hall, 'cause I was still prepping, and listened to it.
Kevin Wack (08:44):
About an hour passed. Then lawyers from the OCC emerged from the courtroom. The judge had just ruled that Michael would not be allowed to testify. His reasoning seemed to be that much of what was at issue during the trial had happened after Michael left Wells Fargo.
Michael Bacon (09:02):
And they came out, said that I wouldn't be testifying, that I was out clear. They were scrambling a little bit, but they stopped, exchanged pleasantries. "Thank you so much for coming. We appreciate it. We're very sorry you didn't get to testify. This was not our plan to have you come all the way here.' And they were really gracious about me making the trek out.
Kevin Wack (09:23):
You had spent, I mean, I don't even know how much time, but I'm guessing hundreds of hours working with the government and working with your own lawyers. And this was going to kind of be the culmination in a lot of ways, right?
Michael Bacon (09:39):
Absolutely. It was a very big deal and I was looking forward, quite frankly, to being able to share to testify to the judge of my observation, my firsthand knowledge. I looked forward to telling the truth and my side of the story very much. That piece didn't need much prep. But the mental and physical, emotional, all of that. So yeah, I was extremely surprised, as was my attorneys. And disappointed. I mean, disappointment set in immediately.
Kevin Wack (10:24):
Michael and I had both been anticipating this trial for a long time. And as it got underway, we found ourselves in similar situations. I had been denied the opportunity, because of a health scare, to cover the trial in person. And Michael had been denied the opportunity, because of a judge's ruling, to testify.
Fortunately, the trial was streamed online. Michael and I still had never spoken to each other. But we both spent much of the next four months doing the same thing, tuning into the live stream on Zoom.
Michael Bacon (10:56):
I was very interested very curious of how this was going to play out, but I did my best to tune in every day. Yes, sir.
Kevin Wack (11:05):
One person who testified during the trial was Michael's former boss, Hope Hardison. Hardison had been the HR director at Wells, and during Michael's final year at the bank, their relationship had been tense. Michael felt that Hardison was trying to wash her hands of the fake accounts problem, that she didn't want to hear any bad news. Hardison eventually helped engineer a reorganization. That's what led to Michael's exit from the bank.
Hardison might have gone on trial herself, but back in 2020 she agreed to pay a $2.25 million penalty to settle civil charges. So instead, she was questioned by a lawyer for one of the former Wells executives whose case did go to trial. Here's some of that exchange.
Lawyer:
Okay. Did you ever, in your role, have occasion to review data on sales integrity issues or sales practice misconduct?
Hope Hardison (11:57):
I got data from Michael Bacon, and I sat on committees where data was prevented
Lawyer (12:02):
With respect to the data itself. did you find it easy to understand? Did you find it difficult? What were your views with respect to the data that you were reviewing?
Hope Hardison (12:11):
Well, the data that I got from Michael Bacon was often difficult to understand. And sometimes things were improving, so sometimes things weren't. The messaging over the top of it was never quite clear. So because of how it was presented and actually just how the data was collected itself, it was often difficult to understand or get to the real details of what the nature of the problem was.
Lawyer (12:39):
And what did that do with respect to your ability to take action on sales practice misconduct, the fact that the data was often difficult to understand?
Hope Hardison (12:51):
Well, having good data obviously is enormously helpful in understanding the nature of a problem.
Kevin Wack (12:56):
As Michael listened to Hope Hardison's testimony, he was seething.
Michael Bacon (13:01):
And I just have to point out: Anybody in business, you report to your manager. She not once during a period, which she testified that she was very concerned about sales practices at the end of 2013, beginning of 2014, and I never once received a question from her regarding the data. I never received any questions around any confusion with the data. And then I certainly was not asked to present that data in more detail or even meet with her to share the data. This data is very simple. It's plus minuses, increases, decreases. It's Business 101.
We even — and I credit again the team — we had a really great support services team that managed the data, you know, did quality assurance on the data. And it got so bad that, you know, we started using arrows. So if you weren't clear, the arrow meant we colored it red, and red was bad, and green was good. And so I think the data was presented at a very elementary level, and this was not difficult data to digest at any level across the entire leadership team.
Kevin Wack (14:25):
Hope Hardison declined to comment for my articles. But a source familiar with her thinking took issue with Michael Bacon's contention that she was trying to distance herself from the bank's sales abuse problem.
Wells Fargo said in a statement: "As we've said many times before, at the time of the sales practices issues, the company did not have in place the appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct. This was inexcusable."
"The past culture that gave rise to the conduct is reprehensible and wholly inconsistent with the values on which Wells Fargo was built. Our customers, shareholders and employees deserved more from the leadership of this company."
In January 2022, the trial wrapped up. Again, I sent a message to Michael's former colleague, asking that he help connect the two of us. This time, I received a stronger commitment. The ex-colleague wrote: "I passed your information on. He will be contacting you."
About six weeks later, early on a Friday morning, I got a short email from Michael. "Good morning Kevin," it read. "I am ready to connect with you."
We made plans for Michael to call me the following Monday. When the phone rang, I recorded my end of the call.
(15:33)
Hi, this is Kevin. I'm doing well. How are you? Good. Happy Monday, yeah. Daylight savings time sort of got me. I woke up an hour later than I need to. Slept through my alarm.
Yeah. Well, I can't remember how long ago it was that I first reached out to you. But it's been awhile, certainly. Years sounds right.
By the time we got off the phone, it seemed pretty clear to me that Michael wanted to go on the record. He wanted to tell the story that he'd been denied the opportunity to tell during the trial. We made plans to meet up several weeks later in New York, when I would be in town for meetings.
Michael told me that he'd be joined by Loretta Sperle, one of his former colleagues at Wells. Loretta had taken over Michael's job when he left the bank.
(16:25)
Now they worked together again at Michael's consulting firm. So one morning in April 2022, I found myself waiting in the lobby of American Banker's office building in lower Manhattan. I looked at my phone to check the time.
I wondered whether Michael had gotten cold feet. But then he and Loretta walked through the revolving door and introduced themselves. I wasn't recording the conversation — at Michael's request — but I remember clearly that some of his first words were "Here we go …" It suggested that he expected this meeting to be the start of an adventure.
Since that day, I've done around 30 interviews with Michael. During those interviews, one theme has come up over and over again. It's something that Michael first mentioned during our initial meeting in New York. He talked about how Wells Fargo had a corporate culture that didn't welcome bad news. "Rainbows and butterflies" was how he described it.
Michael Bacon (17:20):
That was just a phrase that I often used, that it shouldn't be all rainbows and butterflies, but it was. So yeah, at the senior level, certainly the operating committee or the C-suite level at Wells, it was always positive messaging. It was the term 'No bad news welcome here.'
It always had to be somewhat light, or had a positive spin on it. So it made our jobs within our Internal Investigations division very, very challenging, because we weren't the bearers of good news, quite often. Usually this was around employee misconduct and potential brand or reputation damage, or loss, or customer impact. So we weren't bearers of good news.
Kevin Wack (18:27):
It turns out there was a song called Rainbows and Butterflies. It made the country charts in 1983.
Billy Swan (18:34):
I love rainbows and butterflies
Wildflowers and starry skies
And dreams that aren't afraid to come true
Kevin Wack (18:44):
When I asked Michael about the song, it seemed like he was drawing a blank.
Michael Bacon (18:49):
It was just a saying that I said. I had it in my presentations, right. It's been in several decks, that I said 'Beware of rainbows and butterflies.' But I can't say that I tied it to that song.
Kevin Wack (19:02):
Then Michael told me about a different song, one that held a lot of meaning for him.
Michael Bacon (19:07):
I'll tell you a good song. And I've used it, I used it when I was at Wells. And I've tried to get a license to use it as I do more speaking. It's from Good Charlotte, the group, and it's called The Truth. And it's back from 2004, and I started using it back then.
Kevin Wack (19:28):
Michael once played the song at the start of a PowerPoint presentation about his internal investigations unit.
Michael Bacon (19:34):
And they introduced me, and I'm in the back and I never got up. And the music started, and the slide presentation was set to the music. And it was amazing.
Kevin Wack (19:48):
The title of the song speaks to what Michael saw as his mission back then. It also speaks to what he hopes to accomplish by talking publicly about his time at Wells — exposing the truth, even if it's uncomfortable.
I haven't really asked you why you're doing this, why you're talking to me, why after all this time, deciding to put your story out there.
Michael Bacon (20:11):
I'm driven by, I want the truth to come out. I think there's been a lot of information that has not been accurate within the media, within academic reviews and studies and articles.
They didn't know, was a story out there. Processes didn't work, was a story out there. We had a huge cultural problem, we had organizational alignment problems — all of that's been reported. But at the end of the day, there's a handful of executives that knew this was occurring and allowed it to continue. And then even when it was identified as a significant issue, they were extremely slow to respond.
Good Charlotte (21:04):
I want the truth from you
Give me the truth
Even if it hurts me
Kevin Wack (21:18):
This episode of Bankshot was written and reported by me, Kevin Wack. It was edited by Dean Anason and produced by Kellie Malone. Production assistance from Josie Huang. Special thanks to Michael Bacon and Loretta Sperle, who patiently sat for dozens of hours of interviews.