SPRINGFIELD, Ill. – Illinois state Treasurer Michael Frerichs suspended $30 billion in state investment activity with Wells Fargo on Monday, joining a swelling chorus of outrage over the scandal that saw bank employees opening millions of phoney accounts to meet sales goals.
Frerichs was uncertain how much the yearlong suspension would cost the nation’s second-largest bank, which serves as broker-dealer for state investments, but said it likely amounts to millions of dollars. A company spokesman said it will be far less.
“Wells Fargo is a big financial player in Illinois, and I hope to send the message that their unscrupulous practices are not welcome and will not be tolerated,” the Democrat said at a news conference in Chicago.
The move by Illinois, which has nearly $1 trillion a year in banking activities, follows closely on similar action last week by California after regulators in that state and the federal government fined the company $185 million.
A federal consent order issued in September found that bank employees, scrambling to meet sales goals, opened about 2 million deposit, credit card, debit card and online accounts without customers’ knowledge, charging fees and, in some cases, damaging their credit so they had to pay higher interest rates on loans.
Wells Fargo spokesman Gabriel Boehmer noted that the problems occurred in the company’s retail bank, but that its Government and Institutional Banking division has “diligently and professionally” worked with Illinois since 1970.
“We are very sorry and take full responsibility for the incidents in our retail bank,” Boehmer said in a written statement. “We have already taken important steps, and will continue to do so, to address these issues and rebuild the state’s trust.”
Boehmer said that rather than the “millions of dollars” Frerichs estimated the move would cost Wells Fargo, lost revenue will be approximately $50,000 annually.
Frerichs noted that Wells Fargo in 2012 paid a $175 million joint settlement, in a suit led by Illinois, to settle allegations its independent brokers racially discriminating against 3,000 mortgage borrowers. He added that his office would conduct an audit to see if any fake accounts interfered with unclaimed assets in banks that should be returned to the original owner’s state within five years so it can be distributed to heirs.
California state Treasurer John Chiang, who announced last week the state’s $75 billion portfolio would not be used for business with Wells Fargo for a year, issued a statement backing Frerichs.
“Wells Fargo is just the most recent example of the craven abuses that can be perpetrated when a financial institution comes to serve itself rather than its customers,” Chiang said.
AP video of news conference: https://www.youtube.com/watch?v=cI2opV2cM-o
Contact Political Writer John O’Connor at https://twitter.com/apoconnor . His work can be found at http://bigstory.ap.org/content/john-oconnor .