“Due diligence” is a legal term, referring to a person or organization taking reasonable steps in order to satisfy a legal requirement.
In the real world, it means to dig deeply before entering into an association with a person or company.
You wonder what the PGA Tour thinks “due diligence” means as Wells Fargo, the San Francisco-based bank and sponsor of the Wells Fargo Championship in Charlotte, N.C., for the past seven years, disclosed Thursday that it has uncovered an additional 1.4 million potentially fraudulent bank accounts. That would increase the total to 3.5 million fake bank and credit-card accounts created by Wells Fargo without customers’ knowledge or approval, a process that was exposed in a 2013 investigation by the Los Angeles Times.
Wells Fargo, which has agreed to pay $185 million to settle three government lawsuits related to the sham accounts, undertook an internal review that spanned from January 2009 to September 2016, with more than 165 million accounts examined.
During that period, Wells Fargo purchased Wachovia Bank and received $25 billion from the U.S. government for the sales of bonds to the Treasury Department under the 2008 Troubled Asset Relief Program.
Wells Fargo’s purchase of Wachovia, at the government’s behest during the 2008 financial crisis, eventually led to a name change of the PGA Tour-sponsored event in Charlotte, in 2011.
At the depths of the financial crisis, observers wondered how then-PGA Tour commissioner Tim Finchem would keep the Tour’s corporate sponsors. Finchem, who retired after last season and has been replaced by Jay Monahan, did a masterly job in keeping most sponsors in place or finding replacements.
It would have been unfair for the PGA Tour to have done much of a review of Wells Fargo when the bank took over the tournament sponsorship with the Wachovia purchase. At renewal time, the Tour should have taken a fuller look – due diligence – into the bank.
A five-year sponsorship extension was announced in 2014, when Wells Fargo was at the height of its illegal and fraudulent activities.
Instead, Finchem said in the news release announcing the extension, “The Wells Fargo Championship has become recognized as a premier tournament and a favorite among the players since it made its debut on the PGA Tour in 2003.”
All the while, the bank was bilking millions of unsuspecting customers by creating fraudulent accounts. In the most recent statement, 528,000 suspected cases of unauthorized enrollments of customers in the bank’s online bill-payment service were found.
It’s not the first time the PGA Tour has dealt with a questionable corporate entity.
In 2006, Stanford Financial agreed to a 10-year title sponsorship of the PGA Tour event in Memphis, Tenn. By 2009, the Securities and Exchange Commission had accused Chairman R. Allen Stanford of $7 billion-plus of fraudulent investments. Stanford is serving a 110-year prison term for his role in the Ponzi scheme.
Professional golfers Morgan Pressel, Vijay Singh, Henrik Stenson, David Toms and Camilo Villegas lost millions from the Stanford fraud.
During the recent Solheim Cup in West Des Moines, Iowa, Wells Fargo had a massive tent on the grounds. You have to wonder: Who pays for it? How much of the money from the fraud that Wells Fargo perpetrated upon the public was used to support the golf activities?
Golf – and more specifically, the PGA Tour, which is exempt from federal taxes as a 501(c)(3) nonprofit – is a huge driver of charitable giving, but that should not excuse the industry from looking deeply into potential and current sponsors when their activities are brought into question. It seems as if the PGA Tour’s due diligence extends to getting paid and stops short of questioning a corporate culture of a potential sponsor.
Jim Cramer, a former stock trader and show host on CNBC, labeled Wells Fargo as a “rogue bank.”
That may be true, but the question for golf is: Should the game be associated with such entities?
Alex Miceli is the founder and publisher of Morning Read. Email: email@example.com; Twitter: @AlexMiceli