Wells Fargo Barred from State of Ohio Financial Work

COLUMBUS, OH — Ohio Gov. John Kasich announced that, for one year, he is suspending Wells Fargo & Company from working with state agencies and barring the bank from participating in state debt offerings.

Debt issues work similarly to loans and are used by governments and corporations. Governments offer debt issues to fund public projects and services, and agree to pay back the issuer at a later date. Under this ban, Wells Fargo will be unable to compete with other banks for Ohio's debt issues.

Kasich says he is taking the action in response to recent news that Wells Fargo engaged in business practices that drove employees to create more than 2 million new accounts without customers' knowledge or authorization in order to generate new fee revenue. As a result, the bank was fined $185 million by the federal government, and more than 5,000 employees were fired for the practice. Furthermore, some employees who objected to the practices were penalized or fired.

In a statement issued today, Kasich said:

“It’s clear that Wells Fargo’s culture was compromised by greed and by a desire to make money that was stronger than a commitment to following proper ethical standards. While Wells Fargo only does limited retail banking in Ohio, it does regularly seek state bond business so I have instructed my Administration to seek services from other banks instead, and I’ll cast my votes against Wells Fargo on the Public Facilities Commission. This company has lost the right to do business with the State of Ohio because its actions have cost it the public’s confidence. Policymakers’ first instinct in these situations is often to just write another law, but we've seen that that doesn’t always make a difference. We need to send a message to this company—and every other company—that the public must be respected, that ethical standards must be respected and when they’re not it comes with a cost."

Kasich said he may revisit the decision in the coming year if the company makes progress in restoring a "culture of integrity."

Update: Wells Fargo has issued a statement on Kasich's decision.

Wells Fargo values the State of Ohio’s business and will fight to earn it back.

Wells Fargo manages its business with the State of Ohio in business lines that are separated from our retail bank: Wells Fargo Securities, which provides the state with access to U.S. capital markets, and Government & Institutional Banking, which specializes in commercial banking.

In the meantime, Wells Fargo will continue to serve our Ohio customers and be the same, committed community partner in the state. In 2015, we contributed $1.1 million to nearly 145 Ohio nonprofits and schools and an additional $374,982 was donated to Ohio schools through Wells Fargo’s team member matching grants program. Our Ohio team members contributed $176,750 through our annual Community Support and United Way Campaign. Our local team members also volunteered more than 17,000 hours.

This decision comes shortly after Wells Fargo CEO John Stumpf announced he was planning to retire and be replaced by company President Tim Sloan.

“I am grateful for the opportunity to have led Wells Fargo,” Stumpf said in a statement. “I am also very optimistic about its future, because of our talented and caring team members and the goodwill the stagecoach continues to enjoy with tens of millions of customers. While I have been deeply committed and focused on managing the Company through this period, I have decided it is best for the Company that I step aside. I know no better individual to lead this company forward than Tim Sloan."

Stump's retirement is partially the result of a public skewering he suffered at the hands of Sen. Elizabeth Warren, who took Stumpf to task for Wells Fargo's illegal business practices.

The New York Times reported that in at least two 2011 cases, bank employees "wrote letters directly to Mr. Stumpf — who became the company’s chief executive in 2007, and its board chairman in 2010 — to describe the illegal activities they had witnessed." However, the Times noted the former CEO has twice testified to Congress "that he and other senior managers only realized in 2013 that they had a big problem on their hands — two years after the bank had started firing people over the issue."

Image from Gov. Kasich's office