California Treasurer to Suspend Some Business With Wells Fargo -- Update
September 28 2016 - 5:20PM
Dow Jones News
By Rachel Louise Ensign and Heather Gillers
California Treasurer John Chiang said his office would stop
doing some business with Wells Fargo & Co. over the bank's
burgeoning sales scandal.
Mr. Chiang said in a letter to the bank's board that his office
would suspend "its most highly profitable business relationships"
with the San Francisco-based banking group over allegations of
widespread illegal sales tactics.
Under the suspension, the Treasurer's office will for one year
stop making investments in the bank's securities, cease using Wells
Fargo as a broker for buying investments and won't hire the bank as
an underwriter on certain bond deals.
The bank has been under pressure since it became clear its
employees had opened as many as 2 million customer accounts with
fictitious or unauthorized information. It also paid a $185 million
fine and entered into an enforcement action with two regulatory
agencies and the Los Angeles City Attorney's Office earlier this
month.
"Wells Fargo has diligently and professionally worked with the
state for the past 17 years to support the government and people of
California," a bank spokesman said. "We certainly understand the
concerns that have been raised. We are very sorry and take full
responsibility for the incidents in our retail bank. We have
already taken important steps," the spokesman added.
Mr. Chiang's letter to the bank's board took a harsh tone,
saying the bank "fleeced its customers" and accusing it of "venal
abuse."
At a news conference on Wednesday Mr. Chiang said Wells Fargo
chief executive John Stumpf should resign and that he was
disappointed by the executive's testimony last week before the
Senate Banking Committee.
The Treasurer oversees a $75 billion investment pool, but the
amount of business Wells Fargo stands to lose from the suspension
isn't completely clear. Mr. Chiang said the amount was significant
and that the state already has replaced the bank as the lead
underwriter on two bond deals.
Mr. Chiang also said he would use his position on the boards of
The California Public Employees' Retirement System and the
California State Teachers' Retirement System, two major pension
funds that own Wells Fargo shares, to push for governance changes
at the bank including the split of the chairman and chief executive
roles. Mr. Stumpf currently holds both.
California State Teachers' Retirement System spokesman Ricardo
Duran said combining the roles of the chairman and CEO "is counter
to our principles."
Calpers meanwhile said it had no specific comments about Wells
Fargo, but "as a matter of practice and in principle, we support
separating Chairman and CEO roles, consistent with the Calpers
Global Governance Principles."
Others in the public sector also appear to be re-evaluating
their relationships with the bank because of the questionable sales
practices. New York's Metropolitan Transportation Authority is
holding up its routine review of Wells Fargo's application to
underwrite MTA bond deals while it reviews "recent developments
that have been reported in the press," according to finance
director Pat McCoy.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and
Heather Gillers at heather.gillers@wsj.com
(END) Dow Jones Newswires
September 28, 2016 17:05 ET (21:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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