A City Council committee Monday explored the idea of divesting Los Angeles’ funds from Wells Fargo over a fake accounts scandal and its support of the Dakota Access Pipeline.
The city does the majority of its banking with Wells Fargo through 800 accounts and holds more than $40 million in securities with it.
The motion before the Budget and Finance Committee was introduced by Councilmen Paul Koretz and Mitch O’Farrell would not outright cancel the city’s contract with Wells Fargo but would direct the Office of Finance to report on options for doing so.
O’Farrell is not on the committee but spoke at the meeting.
“We are in a new era where we can’t just look the other away nor can we wring our hands when things like this happen, but we have to demand integrity and honesty and fair business practices in the city of Los Angeles,” O’Farrell said.
The committee forwarded the motion to the full council and added a number of recommendations that seek more information and ways to judge a banking institution when exploring doing business with it.
The motion cites the bank’s support of the Dakota Access Pipeline as a reason for the possible divestment, as well as a lawsuit the city settled with Wells Fargo last year after some of its employees created more than two million unauthorized accounts as a way to meet aggressive sales goals set by management.
The settlement resulted in the bank paying $50 million in civil penalties to the city of Los Angeles and $135 million to two federal agencies, and Wells Fargo was ordered to provide restitution to affected customers.
The motion states that the city “has historically upheld strong principles protective of the environment and the health and welfare of its residents. Wells Fargo’s support of the Dakota Access Pipeline Project is at odds with these principles.”
The oil pipeline runs more than 1,100 miles from North Dakota to Illinois, and sparked a major protest that lasted for months near the Standing Rock Sioux Reservation. Members of the tribe opposed the project because they said it passed over a sacred burial ground and would threaten their water source.
After pipeline construction was halted in November by the Army Corps of Engineers, President Donald Trump signed an executive order in January instructing the agency to finish the project and oil started flowing through the pipeline in March.
The pipeline cost an estimated $3.78 billion to build.
In March, members of Divest LA held a rally outside City Hall, attended by about 100 people, to urge the city to divest from Wells Fargo. About two weeks later, the motion was introduced.
Members of Divest LA spoke at the committee meeting and held a news conference at City Hall earlier Monday calling on the committee to approve the motion.
“Wells Fargo has had a long history in its atrocities against indigenous peoples,” said Shannon Rivers, a leader with Divest LA. “Divestment is critical, not just for me and for indigenous peoples, but for all of us.”
Some business and nonprofit groups including the Los Angeles Boys and Girls Club, United Way, the Valley Industry Commerce Association and Los Angeles Area Chamber of Commerce spoke in favor of Wells Fargo and asked the committee to not recommend divestment due to the charity work the bank supports. In 2016, Wells Fargo donated $281.3 million to nonprofit organizations nationwide.
Councilman Mike Bonin said the two sides of Wells Fargo — the charitable side and the side that was accused of creating millions of fake accounts — reminded him of the opening of the Charles Dickens’ novel “A Tale of Two Cities” that read, “It was the best of times, it was the worst of times.”
Bonin and other council members on the committee also struggled with how they could craft future agreements with banks to assure they fit their criteria of being socially responsible in their investments.
“I want to go to where Mr. O’Farrell was pointing in the motion, but I’m still a little murky on what steps we need to take to do that,” Bonin said.
Councilman Paul Krekorian agreed with Bonin on the complexity.
“The fact that you are wrestling with this the way you are I think is reflective of just what you said, about the complexity of this and how it is not — there is no simple way to do that, particularly when you are talking about investments of international or national organizations like this which are across the board, and what we decide at any particular time, or what any future council decides is an acceptable versus and an unacceptable investment to make is going to be a fluid process,” Krekorian said.
“And so evaluating that becomes problematic.”
It was also mentioned by Councilman Bob Blumenfield that nearly every major bank in the nation supported the Dakota Access Pipeline.
In February, the Seattle City Council voted to end its banking contract with Wells Fargo when it expires in 2018 due to its financial support of the pipeline project. Davis in Northern California and Santa Monica have made similar moves.
Wells Fargo executives said in a February statement that it is not the lead bank on the project but merely one of 17 financial institutions that made a loan to the developers of the pipeline. The company said it lent $120 million to the project.
The committee also recommended the Office of Finance develop a new request for proposals to use when reaching agreements with banks and report back to the council on its wording.
The new request was recommended to include the institution’s Community Reinvestment Act score, which tracks a bank’s level of lending, investments and services in low- and moderate-income neighborhoods. Wells Fargo’s score took a significant hit recently due to the fake accounts scandal.
The recommended new request also would require the bank to disclose any recent regulatory action taken against it, and its compliance with the terms of the city’s Responsible Banking Ordinance, which was created in 2012 and requires banks doing business with the city to disclose information on loans and foreclosure activity.
The committee also recommended the Office of Finance report on the impacts of suspending activity with Wells Fargo until it improves its CRA score to satisfactory, and for the City Attorney’s Office to report on the possibility of discontinuing its business with Wells Fargo based on its CRA score.
The committee also recommend the city explore the possibility of creating its own panel to judge and rank banks, and to have a report created on the possibility of diversifying its banking services among a variety of contractors.
–City News Service