(Corrects lede to add dropped word "of")
By Suzanne Barlyn
NEW YORK Oct 4 The scandal over improper sales
practices at Wells Fargo & Co extended to thousands of
small-business owners, according to a U.S. lawmaker, raising
questions about the scope of the bank's issues with unauthorized
In a Sept. 29 letter viewed by Reuters on Tuesday, Sen.
David Vitter, a Louisiana Republican, demanded that Wells Fargo
Chief Executive John Stumpf provide a "full accounting" of
customers affected. Vitter is a member of the U.S. Senate's
banking committee and also heads its small business committee.
Discussions between congressional staffers and Wells Fargo
"have indicated that the fraudulent activity of your employees
was not limited to Wells Fargo's consumer banking operations,"
Vitter wrote. "Thousands of small business owners were impacted
by this fraud."
A person familiar with Vitter's probe say Wells has
identified about 10,000 small business accounts that were
subject to improper practices. Vitter spokeswoman Cheyenne Klotz
declined to comment on specifics about those practices.
Revelations of Wells Fargo's problems with small-business
customers come almost a month after it reached a $190 million
settlement over opening as many as 2 million accounts in retail
customers' names without their knowledge. The bank has said it
fired about 5,300 employees for improperly opening the accounts.
The disclosures have caused a public furor, with Stumpf
facing heated questions before two congressional committees and
other U.S. authorities launching investigations into the bank's
sales practices, including the Justice Department and the Labor
"While the vast majority of accounts in the settlement were
consumer accounts, to the extent there were small business
accounts included, all were previously reported in the total
number of potentially impacted accounts," said Wells spokeswoman
Jennifer Langan. "As stated earlier, Wells Fargo has already
refunded 115,000 accounts. The impacted accounts, including
Small Business, were part of our Retail Bank business."
A Consumer Financial Protection Board spokesman contradicted
the Wells statement, however, saying its figure of nearly 2
million accounts being affected did not include small business
Wells is also battling lawsuits from former employees,
customers and shareholders related to the issue. In a second
letter, Vitter requested that the Small Business
Administration's inspector general, Peggy Gustafson, investigate
PACKAGES OF THREE
Senior bank executives have apologized for opening accounts
customers did not request, but characterized the issue as
limited to relatively few customers and employees in the retail
bank. Early results from Vitter's examination are the first hard
sign that problems may extend further.
Reuters also spoke to a former Wells employee, and a lawyer
representing former employees and a former and current Wells
customer, who described abusive sales practices with multiple
Jose Maldonado, a restaurant owner in Southern California
who banked with Wells Fargo for 15 years, said he discovered
seven accounts after enlisting the help of his accountant. He
initially closed extraneous ones, and ultimately moved his
remaining business to Bank of America Corp and JPMorgan
Chase & Co.
"I don't like Wells Fargo anymore. I don't feel
comfortable," Maldonado said in an interview. "In the past,
there were sometimes crazy accounts without my permission."
Langan declined to comment on Maldonado's accounts.
An ex-Wells Fargo business banker, who declined to be
identified, said employees at his former branch were required to
sell products to small business customers such as hair-salon
owners and carpet cleaners in packages of three - regardless of
whether they needed them.
Those typically included accounts for checking, credit card
processing and payroll, and were often linked to additional
savings accounts, said the former Wells banker. Bankers also
tacked on business credit cards and were pressured to call a
Wells insurance unit, with the customer present, to push
business liability policies.
Langan, the Wells spokeswoman, said the bank discontinued
those packages in April 2015.
Attorney Jonathan Delshad filed two class-action lawsuits
against Wells Fargo in September on behalf of former employees,
including one business banker, who say they were fired for
refusing to create fake accounts to hit sales quotas. Wells
suspended those quotas on Oct. 1.
Other former Wells Fargo business bankers contacted Delshad
after the lawsuit received media attention, he said. "Business
owners are also being ripped off," one wrote to him in a message
he provided to Reuters.
Business and corporate governance experts say small-business
customers can be as susceptible to fraud as any customer.
Owners are typically knowledgeable about their business
expertise but not about banking services, said Peter
Conti-Brown, a financial regulation professor at the University
of Pennsylvania's Wharton School. For example, a new dentist who
borrows from a bank to buy a practice may then need other
services that she does not even know exist, such as payroll
management or credit-card clearing.
But the potential for abuse still exists, he said. A bank
can sell multiple, unnecessary accounts and credit cards to sole
proprietors whose needs rarely exceed making deposits and
writing checks. The risk of abuse is greater when bankers are
required to sell a certain number of products to meet
"The best case is that you will sour your relationship, and
in the worst case, you'll get bankers committing fraud,"
Conti-Brown said. "Wells Fargo has seen both of these things."
(Reporting by Suzanne Barlyn; Editing by James Dalgleish,
Lauren Tara LaCapra and Brian Thevenot)