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 which saw bank employees opening millions of phony 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.
“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.
Frerichs noted that Wells Fargo in 2012 paid a $175 million joint settlement, which included Illinois, to settle allegations its independent brokers racially discriminating against 3,000 mortgage borrowers.
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.”
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