* Chicago joins states of Illinois, California in punishing
* Concerned Connecticut treasurer adds second bond
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By Karen Pierog and Dave McKinney
CHICAGO, Oct 5 The Chicago City Council on
Wednesday approved a one-year suspension for Wells Fargo & Co
from city business because of its scandal over phony
accounts, joining the states of Illinois and California in
punishing the bank.
The ban includes bond underwriting, brokerage, trustee and
other services the bank has provided to the city. Wells Fargo
has earned $19.5 million in fees from Chicago since 2005.
Wells Fargo staff opened checking, savings and credit card
accounts without customer approval for years to satisfy
managers' demand for new business, according to a $190 million
settlement with U.S. regulators and California prosecutors
reached on Sept. 8.
The bank said it has fired 5,300 employees over the issue.
"I hope this action by the city of Chicago will echo around
the nation and make it clear to other institutions this conduct
is unacceptable," said Alderman Edward Burke, who heads the
council's finance committee.
Illinois penalized the bank earlier this week while
California announced a 12-month sanction against Wells Fargo,
that state's oldest financial institution, on Sept. 28.
California replaced Wells Fargo as a lead underwriter on two
bond sales in the wake of its decision.
On Wednesday, Wells Fargo said it would continue to serve
Chicago customers and support non-profit community agencies,
educational institutions and foundations.
"Wells Fargo is disappointed that the Chicago City Council
has chosen to suspend a relationship with one of the nation's
safest and strongest financial institutions at a time when the
city needs access to dependable financial partners," the bank
said in a statement.
Following the vote, Chicago Mayor Rahm Emanuel told
reporters: "The city's disappointed in Wells Fargo."
Illinois Governor Bruce Rauner's office, which included
Wells Fargo in a pool of senior underwriters for bond sales,
said on Sunday the state would not be using the bank for debt
deals "until further notice."
Illinois Treasurer Michael Frerichs on Monday suspended $30
billion in state investment activity with the bank. Those
activities include investments in Wells Fargo debt and bank
Also on Wednesday, Connecticut's state treasurer Denise
Nappier told Reuters in a statement that Morgan Stanley was
added as a co-bookrunner for an October bond sale because of
troubles at Wells Fargo.
"The addition of Morgan Stanley ... was made in an abundance
of caution to help ensure the success of the sale," the
statement said. "Wells Fargo had been assigned as the sole
bookrunner prior to the recent revelations of regulatory actions
against the bank."
In addition to outright sanctions, the states of
Massachusetts and Oregon, as well as the city of New York, have
said they would press for reforms at the bank, await results of
investigations while also reviewing their business relationship
with the firm.
(Reporting by Karen Pierog and Dave McKinney in Chicago and
Hilary Russ in New York; Editing by Matthew Lewis and Daniel