Wells Fargo Falls for Fifth Day as Scandal Draws DOJ Probe
(Bloomberg) -- Wells Fargo & Co., the lender that lost its status as the world’s most valuable bank this week, fell for a fifth day in New York trading after reports that the Justice Department is investigating sales practices that led to the opening of 2 million unauthorized accounts.
The bank dropped 1.8 percent to $45.67 at 9:52 a.m., compared with a 0.2 percent increase for the 24-company KBW Bank Index. The shares are down 8.3 percent from the close on Sept. 7, the day before San Francisco-based Wells Fargo settled allegations that it opened credit-card and deposit accounts for customers without their approval. The KBW Index is down 1.7 percent for the same period.
U.S. attorneys in New York and San Francisco have opened criminal inquiries, a person familiar with the matter said Wednesday. Under Justice Department guidelines, investigators will look into both potential corporate and individual wrongdoing, the person said. The bank’s $185 million settlement with regulators included a record $100 million fine to the Consumer Financial Protection Bureau and $35 million to the Office of the Comptroller of the Currency, the two federal regulators that investigated the bank. The amount also includes $50 million to the Los Angeles city attorney in civil penalties.
News that the Justice Department is investigating Wells Fargo “is likely to prolong the story and create political distractions, including more congressional hearings,” Jaret Seiberg, an analyst at Cowen & Co., wrote Thursday in a note to clients. “We believe this is a long-term headache for Wells Fargo even if the Justice Department does not bring a case.”
JPMorgan Chase & Co. surpassed Wells Fargo as the world’s most-valuable bank on Tuesday, and Thursday’s share-price decline pushed Wells Fargo’s market capitalization below Industrial & Commercial Bank of China Ltd. as well.
Wells Fargo fired 5,300 workers over the matter and said it would eliminate sales goals that regulators linked to its practice of cross-selling products. The Senate Banking Committee plans to hold a hearing Sept. 20, where Chief Executive Officer John Stumpf is set to appear.
Following criticism that U.S. authorities had failed to hold bankers accountable in the aftermath of the financial crisis, the Justice Department last September issued a policy requiring all civil and criminal cases begin and end with a focus on individual accountability.
Under the policy, laid out in a memo by top department official Sally Quillian Yates, companies facing criminal investigations would have to turn over information about any responsible individuals in order to win reduced penalties.