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The fallout from Wells Fargo's fake account scandal continued this week, as California suspended its business relationships with the bank and former employers filed two class actions lawsuits, alleging that they were illegally fired for abiding by the law and not opening fake accounts in consumers names.
Earlier this month, Wells Fargo agreed to pay $185 million in fines after it was revealed that the banks employees had created millions of fake accounts in order to meet internal cross-selling goals. Additionally, Wells Fargo's CEO John Stumpf forfeited $41 million in unvested stock awards. But, as this week's developments have shown, the aftermath is far from over.
California Kicks Wells Fargo to the Curb
California State Treasurer John Chiang announced Wednesday that he was suspending most of the state's business relationships with Wells Fargo, including the bank's "most highly profitable" dealings, in response to its "venal abuse of its customers."
"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 placed their financial well-being in its care?" Chiang wrote in a letter to the bank.
Chiang, who is currently running for governor in 2018, said he would no longer allow Wells Fargo to underwrite certain municipal bonds, would make no further investments in Wells Fargo securities, and would not allow the bank to act as a broker-dealer for the state. The suspension is to last for one year and could cost Wells Fargo millions in lost banking fees.
Past Employees Pile On
When Wells Fargo's settlement was announced, it was also revealed that the bank had fired more than 5,300 employees over the past five years for their role in making fraudulent accounts. But now another set of employees are coming back to haunt the bank -- those who were let go because they followed the law and didn't make sales goals as a result.
Two class actions have been filed, one in California state court and one in federal court, alleging that the bank illegally retaliated against employees who refused to break the law. Jonathan Delshad, the attorney in both cases, describes Wells Fargo's culture as like "a revolving door." "If you weren't willing to engage in these types of illegal practices, they just booted you out the door and replaced you."
And while many companies may turn to arbitration clauses to beat back such lawsuits, Wells Fargo might not have that ability. The bank only added arbitration clauses to some of its employment contracts recently, the New York Times reports.