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.
Case Controversy
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.
Stakeholders
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.
Individualism
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. 
Utilitarianism
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
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.
Virtue Theory
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.
Justified
Evaluation
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
Action Plan
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.
References
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/.
