California’s treasurer announced Wednesday that his office is suspending some business with Wells Fargo, the latest fallout for the bank over its bogus-accounts scandal.
The sanctions will go into effect immediately and include suspending investments by the treasurer’s office in all Wells Fargo securities, as well as suspending use of Wells Fargo as a broker-dealer for investment purchases. The move is in response to revelations Wells Fargo employees opened accounts for customers without their knowledge to meet sales goals from 2011 to as recently as this year.
“Wells Fargo’s fleecing of its customers by opening fraudulent accounts for the purpose of extracting millions in illegal fees demonstrates, at best, a reckless lack of institutional control and, at worst, a culture which actively promotes wanton greed,” the treasurer, John Chiang, said in a statement.
“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 have placed their financial well-being in its care?” Chiang said.
Wells Fargo spokesman Gabriel Boehmer said in a statement that the bank has “diligently and professionally worked with the state for the past 17 years to support the government and people of California.”
“We certainly understand the concerns that have been raised,” Gabriel Boehmer said, adding that the bank will continue to take steps to prevent unethical behavior in the future. “We are very sorry and take full responsibility for the incidents in our retail bank.”
Wells Fargo’s largest employment hub is in Charlotte, where it employs about 23,000 in the region.
Wednesday’s announcement comes one day before Stumpf is expected to testify on Capitol Hill at a House Financial Services committee hearing into the accounts scandal. Stumpf, who was grilled by a Senate panel last week, is expected to again face tough questions on the matter during Thursday’s hearing.
Chiang said the sanctions will remain in place for 12 months. In a letter to Stumpf and the bank’s board, Chiang noted the action suspends Wells Fargo’s most highly profitable business relationships with the state of California and his office.
The treasurer said he will impose even tougher sanctions if the bank does not comply with consent orders it entered into with regulators to resolve allegations of abuses in its sales practices. Those sanctions could include permanent severance of all ties between the treasurer’s office and the bank, Chiang said.
Chiang also said he is working with the California Public Employees’ Retirement System and the California State Teachers’ Retirement System to push for governance reforms at Wells Fargo. The two pension systems combined have more than $2.3 billion invested in Wells Fargo fixed-income securities and equity.
Among other things, Chiang said he wants the bank to separate its CEO and chairman roles, appoint a consumer ombudsman or confirm that such a position exists, and “claw back” compensation for executives “most directly” linked to the unethical sales practices.
On Tuesday, Wells Fargo’s board of directors announced Stumpf will forfeit $41 million in stock awards, while former retail banking executive Carrie Tolstedt will lose $19 million of her awards over the unauthorized customer accounts.