Wells Fargo CEO John Stumpf apologizes to Senate Banking Committee
Wells Fargo Bank expressed disappointment Friday at the city of Sacramento for severing ties over the bank’s fraudulent accounts scandal – and then blasted Councilman Allen Warren over his troubled dealings with the bank.
Hours after the City Council agreed late Thursday to stop doing business with the giant bank, Wells Fargo said it was “disappointed” with the decision though it understood “the concerns that have been raised.”
But Wells Fargo officials took a tougher tack with Warren, whom the bank sued in 2011 over roughly $2 million in unpaid loans. Warren was one of the most vocal advocates of the council’s decision to cut ties with Wells Fargo.
Julie Campbell, a regional vice president for Wells Fargo, said Warren had a “huge conflict of interest” because of his litigation with the bank.
Warren, however, said City Attorney James Sanchez told him there was no conflict of interest. Sanchez confirmed that he spoke with Warren.
Warren added that his push to ban Wells Fargo from city business wasn’t related to his own litigation with the bank. “They can make it personal if they want,” he said in response to the bank’s statement. “My rationale was simply that they had a pattern and a habit of this for years. ... This has damaged people’s lives.”
In a statement to The Bee, the bank said it “commenced legal action against Mr. Warren after he refused to repay loans which now have an outstanding balance of approximately $2.5 million.”
Although the bank’s claims against Warren for the unpaid loans are still pending in court, Wells Fargo added that Warren was ordered to pay the bank’s legal fees after he filed an unsuccessful lawsuit against the bank.
Records filed in Sacramento Superior Court show that an arbitration panel ordered Warren to pay more than $500,000 in legal fees in April 2015. The arbitration award was upheld by Superior Court Judge David Brown in July 2015.
Warren has filed an appeal in that case.
He pushed for the city’s ban on Wells Fargo after investigators revealed the bank had opened 2 million unauthorized consumer accounts. “That’s not the kind of bank I want to do business with at this time,” Warren said before the City Council’s meeting Thursday night. “Banks should be about supporting people, supporting businesses, protecting people’s hard-earned money.”
Wells Fargo Chairman and Chief Executive John Stumpf resigned Wednesday amid intense public criticism.
Sacramento is working to divest nearly $30 million in business from the bank. Sacramento currently holds about $28 million worth of Wells Fargo bonds, according to interim city Treasurer John Colville. The city also has about $800,000 in Wells Fargo stock, he said.
Colville said the city is trying to sell the bonds, but only above a certain price through a “limit” order. Colville said some of the bonds will mature in December, while the longest remaining term on others stretches to 2021.
Colville said he would likely hold Wells Fargo stock from a “fiduciary standpoint” to minimize the city’s losses. Wells Fargo stock has dropped from a 52-week high of $56.34 to $44.75 on Thursday.
Wells Fargo is also the trustee on bonds for the Golden 1 Center, which total about $90 million. Wells Fargo receives about $5,000 annually to administer those accounts, Colville said. The bank was also in the running to be the trustee on the refinancing of arena bonds in the coming months, but Colville said that is no longer the case.
The city did business with one local Wells Fargo broker and will discontinue that relationship, he said.
Campbell, the Wells Fargo vice president, said in a statement that “(w)e certainly understand the concerns that have been raised. We are very sorry and take full responsibility for the incidents in our retail bank.”
The City Council’s action came after an investigation by a federal consumer watchdog agency that found Wells Fargo employees opened 2 million fraudulent accounts between 2011 and 2015 while under corporate pressure to meet sales goals. The bank agreed to a $185 million civil settlement in September and fired 5,300 employees involved in the actions.
Colville said he started reducing business with Wells Fargo in September because he thought it was the ethical move for the city.
Warren said the ban would likely not be permanent but would require the bank to reform practices before the city resumed doing business with it.
State Treasurer John Chiang last month sent a letter to Wells Fargo notifying it that he was suspending its “participation in its most highly profitable business relationships” with the state, including bond underwriting for at least 12 months.