Illinois suspends business with Wells Fargo amid growing fury
Illinois is set to suspend billions of dollars of investment activity with Wells Fargo, as public outrage intensifies over the bank's 2 million fake accounts created without customers' permission.
Wells Fargo may be about to lose another customer: the state of Illinois.
The Illinois state treasurer said Monday that the state is suspending billions of dollars of investment activity with Wells Fargo & Co., in light of recent allegations of widespread fraud by the bank.
The San Francisco-based company agreed to a $185 million settlement last month for fines and restitution after it was revealed that employees opened as many as 2 million fake accounts without customers' knowledge in an attempt to meet sales quotas.
"Wells Fargo is a big financial player in Illinois," Illinois state treasurer Michael Frerichs said during a news conference Monday, according to the Los Angeles Times. "I hope to send a message that their unscrupulous practices will not be tolerated."
Mr. Frerichs estimates the state made $30 billion worth of trades through Wells Fargo last year. Illinois will be suspending that investment activity with the bank for at least one year, he said.
Illinois is not the first state to sever some ties with the embattled bank. Last week California also suspended some business with Wells Fargo.
The two state suspensions taken together aren't likely to cause major financial damage to Wells Fargo, both states' treasurers said. Instead, the move is more symbolic.
But, as the Los Angeles Times' James Rufus Koren points out, if more states and public agencies do the same, it could add up. Such a loss of public-sector business could actually make a dent in the bank's bottom line.
Calls for Wells Fargo chief executive officer John Stumpf to resign over the scandal have rung out from Washington D.C. to California. The company fired 5,300 employees when news of the fake accounts broke, but the company's critics say the problem was suspiciously widespread to have only involved lower-paid employees.
"This isn't the work of 5,300 bad apples, this is the work of sowing seeds that poisoned the orchard," said Sen. Robert Menendez (D) of New Jersey during a Senate Banking Committee hearing in September. "You and your executives created an environment that allowed for this behavior."
But Stumpf insisted that these weren't directions handed down from executives to employees.
"I do want to make it clear that there was no orchestrated effort, or scheme as some have called it, by the company," he said the Senate hearing. "We never directed or wanted our employees, whom we refer to as team members, to provide products and services to customers they did not want or need."
Furthermore, Stumpf said, many well-paid employees, including bankers and a regional president, had been fired over the scandal. The former head of Wells Fargo's retail banking business, Carrie Tolstedt, also chose to retire this summer when she was informed that the bank was going in a different direction. USA Today reports that Stumpf will forfeit $41 million in pay and Tolstedt will lose some retirement benefits and an estimated $19 million in equity stock awards.
This report contains material from the Associated Press.