There is a scandal breaking involving one of the nation's largest banks, Wachovia. Wachovia is a well-respected bank, based in North Carolina, and a huge presence nationally. They may be the fourth or fifth largest bank in the United States. They have been involved in a criminal enterprise that little inklings of it came up last year when I first mentioned it then, and now there are smoking gun documents showing that Wachovia was involved aiding and embedding criminal activity, stealing from people's checking accounts, especially senior citizens. The New York Times has done more work on this than any other newspaper in the country and has great detail in a series of stories about the criminal activity at Wachovia involving the company aiding and embedding criminal activity.

Let me tell you what they have been doing, Wachovia has been assisting criminal rings that have been stealing money from peoples checking accounts by presenting drafts against people's accounts. A number of Wachovia's internal documents have come to light, showing that Wachovia employees knew they were dealing with criminal enterprises, but were participating because the fee income to Wachovia was so large from helping the criminals steal that Wachovia jumped in with both feet.

Now, I've got to share something with you, I am bashing myself at the same time as I'm telling you this because I own stock in Wachovia. There are a small number of companies that I own stock in, most everything I do is through various Index funds and mutual funds, just a very small handful stocks and so I am one of the guilty parties, I guess. Well actually, as a stockholder I call myself the guilty party, but I just want full disclosure to you so you know that as a stockholder I am embarrassed and outraged that a company that I would own stock in is involved now in this criminal activity.

What is important for you to know is the federal regulators have been asleep through all this because this has been going on for years and was discovered by regulators three years ago. Here is how it works and this is why it's important to you and your own wallet. Criminals know how easy it is to present a draft against a checking account and steal money from your account. The banking industry has no security whatsoever for drafts from your account. Think about this, if I walk in the front door of a bank into a branch with a check drawn on your account, the bank makes it tough for me to cash that check. They will probably fingerprint me, they will probably charge me a fee to do it, and they still might not want to cash the check. On the other hand, if I come in through the back door of that bank and present either a paper or electronic draft, the bank pays it with no questions asked.

Alright, now let me tell you what was going on in the Wachovia thing, criminal rings were drafting people's accounts hoping that people and businesses would not notice that these drafts were being presented and then the criminal rings just steal the money. Well, banks have in place "after-the-fact systems", where if an organization is drafting accounts and too many disputes arise where people are saying, "Wait, I didn't authorized this, I don't know who these people are, I want my money back!" It triggers a chargeback rate, which triggers an organization either being put on probation, or having its drafting privileges shut down. Wachovia's alarms kept going off but they kept allowing the drafts because they were making so much money from them and the internal documents show that Wachovia is aware of a half a million people who money was stolen from. A half a million is apparently the number that has been designated in federal court as having had money stolen from them. This is just shocking!

Now, Wachovia has issued a statement that says and I quote, "Earning the trust of our customers is at the heart of what we do every day and we regret this situation occurred. We took this issue very seriously and senior management was actively involved in directing aggressive steps to correct the processes related to the situation. We are confident that the changes we have implemented will help protect our customers". Well, know something, if they have turned it around, good. But what's rotten, is that this was going on at nine different banks. Only Wachovia has been named, but there were nine banks that were involved and actively helping criminals steal from innocent people's accounts. Shame, shame, shame! You know, Consumers Union, the publishers of Consumer Reports, just issued a report on the cozy relationship between the bank regulators and the banks. And how the bank regulators see themselves as the protectorate of the banks against the American people, instead of being there to protect the American people from excesses of illegal activity at the banks.

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