Illinois, California End Some Business With Wells Fargo — At Least For Now

Image courtesy of Mike Mozart

The fallout from the Wells Fargo fake account fiasco continues to pile up, with state officials in both California and Illinois announcing they would stop doing business with the bank for the time-being.

The California state treasurer took an unusual step last week and suspended its ties with San Francisco-based Wells Fargo, while the Illinois state treasurer is expected to announced Monday that the state will suspend billions of dollars in investment activity with the banking giant, the Associated Press reports.

Illinois treasurer Michael Frerichs plans to provide details about the moratorium on business with the bank later today.

The New York Times reports that California treasurer John Chiang has already announced a suspension of state business with Wells Fargo for at least a year, citing the bank’s “venal abuse of its customers.”

Chiang said the suspension revolved around the bank’s “most highly profitable business relationships.”

“How can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who placed their financial well-being in its care?” Chiang wrote in a letter on Wednesday to the bank.

Additionally, Chiang said the state would suspend any investments with Wells Fargo securities and the bank’s work as a broker-dealer hired to buy investments on the treasurer’s behalf.

The NY Times estimates that the move by California — the largest issuer of municipal debt in the country — could cost Wells Fargo millions of dollars in banking fees.

Wells Fargo released a statement on the action, saying it had “ diligently and professionally worked with the state for the past 17 years to support the government and people of California. Our highly experienced and proven government banking, securities and treasury management teams stand ready to continue delivering outstanding service to the state.”

The Illinois and California decisions are in response to the recent revelation that thousands of Wells Fargo employees opened up more than two million fake accounts in customers’ names without authorization.

Workers at the bank say this fraud — for which Wells has already agreed to pay $185 million, but which could end up costing the bank a lot more — was the result of pressure from management to meet unrealistic sales goals and quotas.

Wells CEO John Stumpf, whose total compensation has been slashed by at least $41 million, recently told Congress he first heard about this bad behavior in 2013, and that the bank is now reviewing records going back to 2009.

Last week, Rep. Caroline Maloney (NY) presented Stumpf with evidence indicating that this sort of chicanery may have been going on even earlier than 2009, and that employees claim they were retaliated against for filing ethics complaints.

Illinois treasurer: State will suspend Wells Fargo business [The Associated Press]
California Suspends Ties With Wells Fargo [The New York Times]

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