Two professors predicted the Wells Fargo scandal—in 2014

In the Bruce Springsteen song “Johnny 99,” the Boss tells the story of a guy who can’t replace his lost manufacturing job. Faced with “debts no honest man can pay” and a foreclosed house, he goes on a violent bender. Answering for his crimes, he tells the judge his situation, saying “that don’t make me an innocent man/but it was more ‘n all this that put that gun in my hand.”

According to Springsteen, when you peel away the righteousness from the illegal or the regrettable, you often see nothing more than desperation. But it can also work in reverse—putting people in desperate situations can be a recipe for shady business.

This is exactly how Professors Bruce Fortado and Paul Fadil of the University of North Florida managed to predict the Wells Fargo (WFC) scandal, in which 5,300 employees were fired for creating accounts for customers without their permission, two years before the news broke. According to the professors’ 2014 study of a top-10 bank everyone is familiar with, disguised by the name “Amalgam,” they found that managerial pressure on low-level banking employees makes fake accounts all but inevitable.

“At Wells Fargo, the 5,300 fired employees were initially blamed,” Fortado told Yahoo Finance. Only recently, he says, has anyone considered the circumstances they were put in and looked pasts their fraud.

Originally, most banks took a service-based approach to dealing with customers. But two years prior to the study, “Amalgam” bank management had a “Glengarry Glen Ross” moment and put pressure on tellers to sell, sell, sell. “Paperwork made it seem like service was more important, but the sales began to drive everything,” Fadil said in a phone interview with both professors.

It made both the customer experience and the working environment terrible. “It’s a totally different work experience,” said Fortado. “I have never seen so many unhappy employees.”

Avoiding the sales pitches by using the drive-thru

The tales from the interviews begin innocuously, with employees chuckling about customers starting to opt for the bank’s drive-thru instead of the lobby to avoid sales pitches, rolling up their windows and pretending to be on the phone. “Obviously it takes longer to sell, and you’re going to alienate people,” said Fadil. “It’s like going into a doctor’s office and realizing that the doctor’s only motivation is making more money off you even if it means selling drugs you don’t need.”

Other things went wrong besides frustrated customers being rude. In one instance, a teller attempted to sell something to an elderly man via phone. Instead of making the sale, the man got confused and drove into town to the bank, alarmed.

Faced with customers who clearly didn’t want any part of the products they had to huck, the tellers in the study began to experience intense pressure and negativity. Managers would publicly berate employees and stand behind them, literally breathing down their necks. Tellers didn’t necessarily even want to hit their goals, fearing the targets would readjust to even more out-of-reach numbers.

“The pressure to sell had become so great that people would do whatever it took to get the numbers,” Fadil and Fortado write. Since the market was essentially saturated after years of pushing an old product, that meant juicing the numbers. And if they wanted to leave? “They [were] in a position where they’d have to leave and find a new job during a downturn,” Fortado said.

In the interviews, one teller said employees would make fake calls, falsify referrals, and inflated their numbers by creating accounts in the names of babies, co-workers, or family members and quickly close them. “I saw one bank where 11 grandchildren had accounts in their name,” said Fadil.

Not Wells Fargo

Given the prescience of the study, it’s easy to forget who exactly we’re talking about.

“The paper wasn’t on Wells Fargo. It was on a different bank!” Fadil said. “Wells Fargo went beyond the pressure exerted by Amalgam and had targets for new sales being closed in a branch every day, and threatened to fire those who did not comply.”

At both banks, the high-pressure sales culture produced the similar results—fraud. And, as the professors stress, many large banks have adopted these aggressive sales programs to compete with each other, suggesting that fraudulently opened accounts likely spreads past Wells Fargo and this other top-10 bank.

In fact, CNNMoney recently reported that the Office of the Comptroller of Currency, a federal regulator of banks, is looking into how deep this really goes and whether that result really is inevitable given this specific set of circumstances. So how did this all happen?

According to Fadil and Fortado, it started in the 1980s when deregulation allowed banks to start competing to sell?? new products against other more market-driven financial companies. Thrusting themselves into these new spaces, many banks focused more on cross-selling (selling customers multiple products), while moving away from a customer service-based model.

“In the 1990s some of the big branches did back off on their sales culture because customers were getting upset,” said Fadil. That didn’t last, which raises the question of whether Wells Fargo’s removal of sales targets is permanent or merely part of a cycle.

“Do we adjust our expectations or does the industry go back to service?” Fortado mused. “I think the horse is out of the barn when it comes to them going back to a purely service culture.” If that’s the case, it’s important for consumers to know whom the employees are really serving.

At a car dealership, the wall between service and sales is still up for the most part, the professors say. “In the front you almost have your defenses up, but when you go to the back of the shop, most of the time you figure they’re going to act in your best interests,” said Fortado. But when you’re wrong it can cost you. In another side of the financial industry – retirement accounts – the White House estimated that $17 billion is lost annually due to conflicted advice when customers assumed their advisors were working in their best interest as fiduciaries.

Typical means of disclosure, it seems, are often pitifully ineffective in the face of people’s assumptions about whose interests are being served. For traditionally service-oriented industries where consumers confer trust—banking, education, medicine—it’s hard to imagine anything short of banner ads that say “we are looking out for our shareholders’ interests, not yours” being enough to properly notify the public of a shift to a sales culture. Though no amount of disclosure would help customers at “Amalgam” and Wells Fargo from fake accounts, perhaps banners like these would have at least armed customers—especially some of the more vulnerable ones—against pressure to legally sign up for a new account. As the professors noted, the desperate tellers would often target lower-income customers.

Fadil and Fortado point to a fundamental flaw that may prevent a good service and sales balance from ever being struck—the fact that the customer has become subordinate to the stockholder. “[The] paper does conclude that bank leaders would be better off with more balanced consideration of the parties’ interests, including the interests of both employees and customers,” said the professors in an email, pointing to a central paradox that the high goals discouraged motivation. Still, throughout Amalgam bank’s unrealistic sales targets, as with Wells Fargo, the stock went through the roof while management suppressed questions raised of its branches’ problematic behavior. Only certain people’s money, it seems, talks.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumerism, tech, and personal finance. Follow him on Twitter @ewolffmann.

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