California Drops Wells Fargo Amid Scandal

     SACRAMENTO, Calif. (CN) — Citing “legal and ethical outrage” over Wells Fargo’s fake accounts scandal, California State Treasurer John Chiang said Wednesday that the Golden State will immediately suspend major aspects of its lucrative relationship with the beleaguered financial behemoth.
     Chiang, who oversees nearly $2 trillion in annual banking moves, issued lofty sanctions against Wells Fargo including the suspension of his office’s investments in all of the bank’s securities. California will also forgo using Wells Fargo as an underwriter for the sales of state bonds.
     Chiang, a Democratic candidate for governor in 2018, lashed out at the California-based bank for being complicit in opening millions of phony bank accounts.
     “Wells Fargo’s fleecing of its customers by opening fraudulent accounts for the purpose 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,” Chiang said in a statement.
     California, the nation’s largest issuer of municipal debt, will also stop using Wells Fargo as a broker-dealer for the purchase of investments, according to Chiang.
     “How can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care?,” Chiang wrote in a letter to Wells Fargo chairman John Stumpf.
     The sanctions will last one year and potentially longer if the bank fails to “demonstrate compliance” or engages in similar behavior, Chiang said.
     California’s sanctions against Wells Fargo are particularly harsh given that Chiang manages $75 billion worth of investments.
     Last week former and current Wells Fargo employees filed a $2.6 billion class action lawsuit in Los Angeles County Superior Court, claiming that the bank’s strict sales quotas encouraged the class to participate in the systemic fraud.
     “The biggest victims of this scheme are a class of people that nobody else has talked about. The biggest victims of Wells Fargo’s scam is the class of victims that were fired because they did not meet these cross-sell quotas by engaging in the fraudulent scam that would line the CEO’s pockets,” the class says in its lawsuit.

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