California suspends some Wells Fargo business amid scandal
Sep 29 2016 by Marjorie Miles
California Treasurer John Chiang hit Wells Fargo Bank with the loss of state investments and other sanctions Wednesday, punishing the mammoth bank for "fleecing" customers who had credit cards and other accounts fraudulently opened in their names.
"Wells Fargo's fleecing of its customers by opening fraudulent accounts for the objective 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 said in a statement.
The state now invests $800 million in Wells Fargo securities that are all due to expire in the next few months.
On Wednesday, State Treasurer John Chiang announced the suspension of Wells Fargo as a managing underwriter on state negotiated bond sales for the next 12 months.
In the meantime, Chiang said he will work with board colleagues at the California Public Employees' Retirement System and the California State Teachers' Retirement System to pursue governance reforms ensuring this type of behavior and systemic corruption does not reoccur.
The Wells Fargo board acted Tuesday to strip Stumpf and the executive who ran the retail banking division of millions of dollars in pay, a move known as a "clawback" that falls within company directors' authority. Carrie Tolstedt, the former head of Wells Fargo community bank unit, where the misconduct took place, will give up $19 million in unvested stock awards and not be eligible for a 2016 bonus. "They ruined my life", said Bill Bado, a Pennsylvania banker at Wells Fargo who was sacked in 2013 for tardiness eight days after sending an email to HR detailing the opening of unauthorized accounts. Jerry Brown completes his term. Have you resigned as CEO or chairman of Wells Fargo?
But banks' legal advisers worry that the Wells Fargo scandal will result in them putting stiffer, more concrete requirements into their proposal, such as requiring banks to decide very quickly - perhaps in as little as 30 days - on clawing back compensation once misconduct has been discovered, according to the general counsel of a large Wall Street bank, who spoke on condition of anonymity.
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The consumer banking giant, which is also the biggest USA mortgage lender, fired about 5,300 employees starting in 2011 in connection with the sales practices.
NEWS BRIEF The state of California has suspended all official dealings with Wells Fargo, following a scandal that has brought heavy scrutiny to the San Francisco-based bank.
For Wells Fargo and Stumpf, the question now is can they put a number on accountability - and is $41 million that number?
Warren's latest slapdown of Stumpf comes just a day before the Wells Fargo CEO is to appear before the House Financial Services Committee Thursday. The two pension systems combined have more than $2.3 billion invested in Wells Fargo fixed-income securities and equity. "We disagree with the allegations in the complaint and will vigorously defend against the misrepresentations it contains", Wells Fargo said in a statement.
Like most US companies, Wells Fargo's broadest options for recouping pay are reserved for situations where it must "restate all or a significant portion of its financial statements", according to a proxy filing.
Wells Fargo responded that company understood "the concerns that have been raised", and promised to "address these issues and rebuild the state's trust".
The two executives will also forgo any bonus payments for the year.