Wells Fargo is a bank that is well known across all of America, stretching its reach as far back as the 1800s.
They have come under fire yet again, however this time it is a lawsuit from a city in Michigan that has been struggling with a water supply crisis for over 5 years now. The lawsuit is entailing that Wells Fargo underwrote the bond sale that financed and enabled flints inevitable participation in the Karegnondi water authority pipeline. This would then lead the city to be fed water, untreated, from the flint river which contained lead and legionella bacteria.
This paper will analyze the actions that Wells Fargo took using the ethical theories: Individualism, Utilitarianism, Kantianism, and Virtue Theory. An individualist would argue that Wells Fargo acted ethically because they underwrote the bond sale which is a perfectly legal thing to do to make a profit. A Utilitarianist would also view this as unethical because not everyone was happy in the end of these decisions. Only the banks benefited from the city’s suffering. Kantians would argue that this is unethical because the city was used as an end, not a means, which in turn only led to profit for the banks and no benefit to the people of the city. Finally, virtue theory would argue that this was unethical because the banks were deceitful in their actions.
Before getting into the suit, it is critical to know just what has been going on in the city for so long. Well before this crisis started, the city has dealt with a water issue since the Flint river, for over a century has been a waste dump for many of the industries along the shoreline. This meant that the river had been subjected to years of contamination that many people knew about through analysis. The city had been the birthplace of General Motors which sparked an increase in profit. Population soared to approximately 200,000 and the city itself was a booming economy up until the 1980’s when oil prices and auto imports rose. This led to 2011 where the population was halved from where it was and many homes were abandoned from lack of income. (Denchak)
With a 25 million debt, the city fell under state control. The governor, Rick Snyder, appointed an emergency manager who saw fit to cut numerous city costs in an attempt to alleviate the debt. This led to the decision in 2013 to end the city’s piping of treated water for its residents from Detroit. Instead the found a cheaper alternative in pumping water from the Flint river until a new water pipeline was built for Lake Heron. As stated before, the Flint river has been a dumping ground for over a century and it was had a long time to become highly corrosive. Flint officials failed to treat the water source and as such thousands of families were exposed to lead and soon after lead poisoning.
The controversy at hand is that Wells Fargo, according to the lawsuit, deliberately underwrote the bond sale that would finance the switch from the Detroit Water and Sewage Department and move to the KWA pipeline. Essentially what they did was finance the project of swapping water sources even though they knew the flint river wasn’t safe to drink in an attempt to make a profit. (Malo) The risks for them outweighed the potential rewards. The complaint stated, “each engaged in conscience shocking behavior by underwriting Flint's participation in the KWA—and thus the poisoning of Flint's children, residents, and other users—knowing full well there would be drastic and dire health consequences to the children of Flint.” (Alcorn). The argument laid out is whether Wells Fargo and the other banks did anything unethical by analyzing four main theories in ethics.
The stakeholders in this controversy are the entire city of Flint, Michigan, the three banks: Wells Fargo, JP Morgan, and Stifel, Nicolaus & Company, the Governor of Michigan and his appointed emergency manager, and anybody that had a share in the company of Wells Fargo and other banks.
The likelihood that the board of directors, The CEO John Stumpf, who had already done other unethical behaviors in the company such as enforcing the creation of numerous bank accounts for customers whether they asked for it or not and then charging them fees, is very high. Everyone of those people played a key role in the suffering of the people of Flint. The accounting team was most likely apart as well since they were the ones who most likely underwrote the bond sale in the first place. The emergency manager and the governor also had a role since there is no doubt that they knew of the waste dumping in the flint river.
The idea of individualism is that, “the only goal of a business is to profit, so the only obligation that businessperson has is to maximize profit for the owner or stakeholders, within the law.”(Desjardins) Using this ideal, Wells Fargo can argue that they operated within the bounds of the law since it only underwrote the bond sale, a perfectly normal procedure in business, to achieve a later profit. An individualist would see this a perfectly reasonable argument considering that they made a profit and stayed within the law doing it. The flip side you could argue is that they knew the risks of pumping that water into the city and did nothing about it which one could argue would be their fault if they were poisoned or died because of their sale. If they are in part to blame since they knew the risks this would in turn make them culpable to the affected people. That is where they break the law. By not addressing the health hazards and by ignoring them. An individualist when looking at the present facts would find Wells Fargo unethical because in this reasoning the broke the law.
A Utilitarianist’s belief is that everybody should be happy with the result in the end. If someone is unhappy than they do not approve. It is the idea that everybody, including ant customers, or company members, or in this case people of a city that honestly had no control over these decisions, are satisfied.(Desjardins) There are many people in this case that are unhappy and probably furious with all the events that befell the city including the case at hand, the unethical practices of Wells Fargo and the other two banks. Wells Fargo would not satisfy the Utilitarianism theory because they only sought to make themselves happy and let thousands of other suffer. The Governor is most likely also dissatisfied with these results since it hurts publicity for him as well as caused the deaths and poisonings of his citizens. To maximize happiness is what a utilitarian stands for. Wells Fargo achieved only their own happiness so therefore a utilitarian would argue that they are as unethical as they come.
Kantianism utilizes the formula of humanity for its ideals. This states that everybody should be treated as an end, not a mere means. A Kantian would evaluate this case and view it as unethical because Wells Fargo used the city of Flint to make a profit and simply as a mere means. To them it was just business and the lives lost or affected by the outcome of their actions are just casualties of that profit. The City’s rationality was compromised because they were told they would be getting a new form of a water source but were not aware that it would be contaminated. “Kant believed that truth telling could, but lying could not, be made a universal law.” (Desjardins) What he meant by this is that as a society if everyone lied then rational communication would never work, thus lying is unethical. Wells Fargo lied about why they wanted to help the city and thus would be considered unethical. Kant also believed in motivation. He believed that one can have moral worth only if they are motivated by morality. In this case what Wells Fargo was motivated by was to make a fast dollar. Their morals were skewed for profit and not for helping the city which in turn means they have no moral worth.
The concept of virtue theory is to evaluate an action and determine if it is acting ethically correct using the four cardinal virtues of courage, honesty, temperance, and justice. Wells Fargo broke some of these virtues by being dishonest and not transparent with their plans to fund this project simply because they saw a dollar sign and not the people that would be affected. They also violated justice by causing harm to numerous people from their actions. In this instance temperance and courage don’t really apply. There was no aspect where Wells Fargo was courageous in their endeavor to fund this pipeline change. In fact, you could argue that they were the opposite of courageous because they had a mixed motive to make a profit. There really was no evidence of temperance because to show temperance means to restrain from one’s desires. Wells Fargo desired money and showed no restraint in harming the city to make that profit. Virtue theory would argue that since they broke even one of these four virtues, they are using unethical practices.
In my opinion Wells Fargo’s actions were unethical and immoral. Wells Fargo could have not invested in the switching of the water lines, because they knew about the risks, and that could have been their explanation. Instead they decided it was a better idea to hit the go button and watch as numerous families were poisoned and infected by the contaminated water while their pockets grew larger. Even the city had questioned why these banks would agree to paying for this switch when they knew they wouldn’t be able to pay it back. In the end the town got the answer they were looking for.
Wells Fargo had to be aware of the risks going in. There had been a history of that river being the dumping area for many businesses for years and there were records of it. To deny any of this, would be hard to prove especially when there really wasn’t any benefit for them on the outside. No one could have predicted that
For the past few years, the water crisis in Flint, Michigan has been brought up in the news when some new lawsuit springs up. Whether people want to like it or not, Flint was a dying city with a substantial debt and this caused the emergency manager appointed by the Governor to cut corners in an attempt to fix this debt. He did not set out to cause the issue, and Wells Fargo most likely didn’t want any harm to come to the people of the city, but they certainly didn’t care if anyone did as long as they made a profit.
Wells Fargo for years, has put the customer first in many of their ventures. Since the start of the company when they were escorts for investors out in the west. They put themselves at risk to help their customers. Now it seems that they have forgotten that statement and a new promise should be made. One that always thinks of the customers first and not themselves. One that in the end would see everyone benefit and not just themselves.
The company’s values have been set for decades but some new ones need to be made. This should include always being honest and transparent with the customer and the people they deal with. It should take into consideration the customer and their physical wellbeing. If for example in this case, no one is benefiting from the deal you made except you, there is a problem. It shouldn’t be a one-way street. On paper, the deal seemed beneficial to all. The city gets their water at a cheaper cost and Wells Fargo profits from the deal after.
Wells Fargo, if proved liable for these charges should issue not only a public apology but pay damages for the harm that has fallen on this city. On top of that they should work to clean the river as a whole. Invest in filtration systems at the least to treat the water and make it drinkable. Instead of the city relying on bottled water, they can utilize the cheapest option, being the Flint river, and still be able to drink it. It won’t be easy but Wells Fargo has the money and power to do something about this tragedy.
This proposed plan would most likely benefit Wells Fargo in the long run, because people will eventually forget and forgive the company and also it will make them look better as a whole to be seen actively trying to fix the problem in Flint that has been an issue for six years and is still going on to this day. It’s amazing that it has taken this long to fix the solution that should have been a pressing matter, but the American people are quick to move on to other things.
By enforcing this plan, Wells Fargo
will more than likely be able increase profits as well. Simply by accepting the
fact that they made a mistake and are trying to fix it is the best way to when
the public back.
Alcorn, Chauncey. “Flint Residents Sue Investment Banks over Water Crisis.” CNN, Cable News Network, 8 Oct. 2020, www.cnn.com/2020/10/08/business/jpmorgan-wells-fargo-flint-water-crisis/index.html.
DesJardins, Joseph R. An Introduction to Business Ethics. McGraw-Hill/Irwin, 2014.
Henderson, Jennifer, and Chauncey Alcorn. JPMorgan, Wells Fargo and Stifel, Nicolaus & Co Accused in Flint Lawsuit, www.msn.com/en-us/news/us/jpmorgan-wells-fargo-and-stifel-nicolaus-and-co-accused-in-flint-lawsuit/ar-BB19PTZi?li=BBnb7Kz.
Malo, Sebastien. “Flint Water Crisis Victims Sue Chase, Wells Fargo.” Reuters, Thomson Reuters, 7 Oct. 2020, www.reuters.com/article/usa-environment-lawsuit/flint-water-crisis-victims-sue-chase-wells-fargo-idUSL1N2GY2I3.
November 08, 2018 Melissa Denchak. “Flint Water Crisis: Everything You Need to Know.” NRDC, 1 May 2020, www.nrdc.org/stories/flint-water-crisis-everything-you-need-know.
Ruble, Kayla. “Flint Residents Sue Investment Banks, Accuse Them of Helping Create Water Crisis.” The Detroit News, The Detroit News, 7 Oct. 2020, www.detroitnews.com/story/news/michigan/flint-water-crisis/2020/10/07/flint-residents-blame-water-crisis-investment-banks-lawsuit/5912871002/.