Banking

Massachusetts becomes latest state to penalize Wells Fargo

Massachusetts has become the latest state to penalize Wells Fargo over its accounts scandal by pulling the bank from a list of approved bond underwriters.
Massachusetts has become the latest state to penalize Wells Fargo over its accounts scandal by pulling the bank from a list of approved bond underwriters. AFP/Getty Images

Massachusetts this week became the latest state to penalize Wells Fargo over its accounts scandal by pulling the bank from a list of approved bond underwriters.

Treasurer Deborah Goldberg suspended the San Francisco-based bank for one year effective Monday, said Chandra Allard, a spokeswoman.

The state is scheduled to sell general-obligation debt by auction in November. Goldberg asked staff to review other contracts and investments with the San Francisco-based bank.

“Wells Fargo has treated their employees, their customers, and the general public in a completely reprehensible fashion,” Goldberg said in an e-mailed statement.

Massachusetts follows California, Illinois and Ohio in pulling its business from Wells Fargo, which agreed last month to pay $185 million to resolve claims that employees opened accounts consumers didn’t know about to boost sales tallies.

Also, on Tuesday, S&P Global Ratings lowered Wells Fargo’s credit-rating outlook to negative from stable on concern fallout from the company’s retail-banking scandal is spreading outside the consumer division.

S&P said the replacement of former Chief Executive Officer John Stumpf last week and changes to the bank’s retail-banking model “could weigh on our view of the company’s business stability.” The firm said new investigations by the bank and outsiders could reveal additional wrongdoing.

Federal prosecutors in New York and San Francisco have opened criminal inquiries into the bank. Wells also faces lawsuits by fired or demoted workers, customers and investors. Local governments such as Chicago and Seattle have also withdrawn some of their business.

Mark Folk, a spokesman for the bank, declined to comment on the ratings outlook.

“We value the commonwealth of Massachusetts’ business and will work to earn it back,” Jessica Ong, a spokeswoman for Wells Fargo, said in an e-mailed statement. “We will continue to serve our Massachusetts customers and be the same, committed community partner in the state, where 1,300 of our team members live and work.”

Massachusetts issued about $7.5 billion of municipal debt in the first six months of the year, according to data compiled by Bloomberg. Wells Fargo, the fifth-largest underwriter of muni debt overall during that period, didn’t rank in the top three firms for the state.

Wells Fargo’s new CEO, Tim Sloan, pledged last week to make up all of the lost municipal customer business “and more.”

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