Wells Fargo Bank Gives Scammer Three Tries

15 january 2013

How difficult is it to trick Wells Fargo Bank into wiring $2.1 million to a bogus bank account in Hong Kong? Maybe not as hard as you would think.  Last December, an unidentified scammer sent Wells’ Corporate Trust Services department in San Francisco two faxes asking that money be wired from a Wells escrow account to two banks in New York and Hong Kong. After those two banks rejected the transfers on the grounds that the recipient accounts— in the you’ve-got-to-be-kidding name of  HUGE International T. Ltd.—didn’t even exist, the scammer sent a third fax asking Wells to transfer money from the same escrow account to a third bank in Hong Kong. Wells complied and the money was moved.

That remarkable tale is contained in a previously unreported lawsuit that the U.S. Attorney for the Northern District of California filed earlier this month. The transfers were made from an escrow account Wells maintained for California’s largest hospital chain, Catholic Healthcare West, which changed its name in January to Dignity Health.

In a statement to Forbes, Wells Fargo’s Corporate Trust division described itself as the victim of a “sophisticated fraud,”’ and added it is “constantly enhancing our procedures for protecting customer assets.”   The statement said the bank “has made its customer whole and is working with law enforcement to recover the funds and to identify and prosecute the fraudsters.” Elise Wilkinson, a Wells Vice President and spokeswoman, said it is still unknown how much money might be recovered from Hong Kong.  “We’re working with law enforcement to determine what funds if any are still available,” she said.

Here’s more of the story, as recounted by the U.S. Attorney in its “complaint for forfeiture”–the first step in the legal process of getting Hong Kong authorities to hand over what’s left in the fraudster’s account. As part of its contract with Merced County to operate the Mercy Medical Center in  the San Joaquin Valley, Catholic Healthcare West is  required to maintain $7.5 million in an escrow account.  CHW wanted to move that escrow account from WestAmerica Bank to Wells Fargo and needed the approval of the Merced County Board of Supervisors to do so. So the board put the item on its official agenda for Feb. 15, 2011, posting on the county web site a  partial copy of the escrow agreement, including the signatures of Merced County Director of Public Health Tammy Chandler and CHW Chief Financial Officer Michael Blaszyk.

On Dec. 6, 2011, Wells Fargo received a facsimile asking that $445,000 be wired from the CHW escrow account to an HSBC account in New York, held in the name  of HUGE International T. Ltd. The fax included what appeared to be written authorizations from Chandler and Blaszyk—-with their signatures (it turns out) copied and pasted from the contract the county had posted on the Internet. After HSBC rejected the transfer, saying it had no such account, the Wells Fargo escrow agent supervising the CHW account called the phone number for Blaszyk listed on the suspect fax—without first verifying that number. When no one answered, he left a voicemail and got a call back from someone claiming to be Blaszyk, who told him to disregard the money transfer.  On Dec. 14, Wells Fargo got another faxed request, this one asking $445,000 be sent to a Hong Kong account for HUGE International at Hang Seng Bank—which also rejected the transfer, because no such account existed.

Finally, on Dec. 19^th, Wells received a third fax, asking that $989,000 be sent to an account for Textil Trading UK Limited at Standard Chartered Bank HK Ltd. in Hong Kong. Wells wired the money from the escrow account—-without, apparently, questioning why cash from a California hospital chain was being sent to a Hong Kong account, particularly after two attempts to send it to other accounts had failed. On Dec. 21, Wells received yet another fax asking that $2.9 million be wired to Standard Chartered.  Wells Fargo didn’t complete that transfer—but only because it would have required the sale of securities and the fax didn’t say which to sell. The next day, when a request to transfer $1.1 million arrived by fax, Wells dutifully wired that amount to the Textril account in Hong Kong.

Finally, on Dec. 28^th, when a sixth fax arrived asking that an additional $2.2 million be wired to the Textil account, the Wells escrow agent finally called CHW–at its real number–and learned all the earlier transfer requests had been fraudulent. Wilkinson declined to comment on what if any additional steps the escrow agent took before Dec. 28, to check on the legitimacy of the faxed requests or on whether the agent had been disciplined or given any additional training after the incident.

To be fair, Wells Fargo, which was featured on the cover of the Feb. 13th issue of Forbes as “The Bank That Works” and boasts Warren Buffett‘s Berkshire Hathaway as its largest investor, is hardly the only big, sophisticated company to fall for what seems like an amateur hour scam. Last year, Forbes reported how publisher Conde Nast mistakenly paid $8 million to a Texan who sent just one email–an email that appeared to change the account to which payments for Conde’s  printer should be sent.