Chicago Latest To Sanction Wells Fargo For Defrauding Customers
Above Photo: A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois, U.S. on February 10, 2015. REUTERS/Jim Young/File Photo
The Chicago City Council on Wednesday approved a one-year suspension for Wells Fargo & Co from city business because of its scandal over phony accounts, joining the states of Illinois and California in punishing the bank.
The ban includes bond underwriting, brokerage, trustee and other services the bank has provided to the city. Wells Fargo has earned $19.5 million in fees from Chicago since 2005.
Wells Fargo staff opened checking, savings and credit card accounts without customer approval for years to satisfy managers’ demand for new business, according to a $190 million settlement with U.S. regulators and California prosecutors reached on Sept. 8.
The bank said it has fired 5,300 employees over the issue.
“I hope this action by the city of Chicago will echo around the nation and make it clear to other institutions this conduct is unacceptable,” said Alderman Edward Burke, who heads the council’s finance committee.
Illinois penalized the bank earlier this week while California announced a 12-month sanction against Wells Fargo, that state’s oldest financial institution, on Sept. 28. California replaced Wells Fargo as a lead underwriter on two bond sales in the wake of its decision.
On Wednesday, Wells Fargo said it would continue to serve Chicago customers and support non-profit community agencies, educational institutions and foundations.
“Wells Fargo is disappointed that the Chicago City Council has chosen to suspend a relationship with one of the nation’s safest and strongest financial institutions at a time when the city needs access to dependable financial partners,” the bank said in a statement.
Following the vote, Chicago Mayor Rahm Emanuel told reporters: “The city’s disappointed in Wells Fargo.”
Illinois Governor Bruce Rauner’s office, which included Wells Fargo in a pool of senior underwriters for bond sales, said on Sunday the state would not be using the bank for debt deals “until further notice.”
Illinois Treasurer Michael Frerichs on Monday suspended $30 billion in state investment activity with the bank. Those activities include investments in Wells Fargo debt and bank broker/dealer services.
Also on Wednesday, Connecticut’s state treasurer Denise Nappier told Reuters in a statement that Morgan Stanley was added as a co-bookrunner for an October bond sale because of troubles at Wells Fargo.
“The addition of Morgan Stanley … was made in an abundance of caution to help ensure the success of the sale,” the statement said. “Wells Fargo had been assigned as the sole bookrunner prior to the recent revelations of regulatory actions against the bank.”
In addition to outright sanctions, the states of Massachusetts and Oregon, as well as the city of New York, have said they would press for reforms at the bank, await results of investigations while also reviewing their business relationship with the firm.