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Panel Rules Wells Fargo Must Pay, Admit Mistake

Wall Street Journal

An arbitration panel of the National Association of Securities Dealers ordered Wells Fargo Securities Inc., a subsidiary of Wells Fargo & Co., San Francisco, to pay a former financial consultant $1.15 million and admit that an error by the company caused her to be arrested and indicted.

In 1997, federal authorities charged the consultant, Paula Whitsell, with causing Wells Fargo Bank to fail to file a currency-transaction report, a felony. But the government later moved to have the charge dismissed, and a judge agreed.

The arbitration panel ordered Wells Fargo to amend a previously filed form that was sent to the NASD registration-and-licensing database, which is used by regulators. Wells Fargo must add the following language: “Paula Whitsell was arrested and indicted because of an error committed by Wells Fargo Bank and through no fault of Paula Whitsell.”

Wells Fargo spokeswoman Daphne Larkin said, “We have a policy that we don’t comment on any litigation.”

Ms. Whitsell, 49 years old, couldn’t be reached for comment.

Of the $1.15 million award, $900,0000 was for actual damages suffered by Ms. Whitsell, and $250,000 was for legal fees.

Ms. Whitsell and another Wells Fargo employee were accused in a federal indictment in 1997 of causing the bank to fail to file a currency-transaction report for a deposit of $25,000. Currency-transaction reports, which are often used by the government to track money laundering, are required for currency transactions involving more than $10,000. The women were indicted as part of a larger undercover investigation of Mexican doctors who were accused of filing false insurance claims in the U.S.

The charges against the two were dismissed within months. But Wells Fargo refused to publicly acknowledge its mistake, according to a statement by Ms. Whitsell’s lawyer, Philip M. Aidikoff. This caused “significant financial hardship for Ms. Whitsell and her family for more than a year after the arrest,” he said.

The award against Wells Fargo came after more than two years of legal proceedings. Ms. Whitsell filed a claim with the NASD in 2000 alleging, among other things, that her employment was wrongfully terminated and that Wells Fargo defamed her. Wells Fargo denied the allegations and sought to have Ms. Whitsell’s case dismissed and to have her pay its attorney’s fees.