Wells Fargo has marketed itself as the bank of choice for Latinos, yet a new report details the bank’s ties to the private prision industry, which lobbies for, and profits from, stepped-up enforcement and criminalization of immigration laws, like Arizona’s SB 1070.
Jesus Gerardo Noriega Esquivel and his family were long-time Wells Fargo customers until they found out about the industry’s connections to private prisons. Esquivel, an undocumented immigrant brought to the United States at the age of nine, was saving his slowly-earned money to study as an automotive engineer. His family has held Wells Fargo accounts for more than ten years.
Soon after being stopped for a broken taillight and then detained for several days in the Aurora Detention Center in Colorado, run by GEO Group, Esquivel found out the same bank he kept his college money in was tied to GEO as both an investor and lender.
He and his family closed their accounts the same day he discovered the connection.
“After we left the meeting, my mom and I drove straight to Wells Fargo and closed our accounts,” said Esquivel. “We were angry and disgusted that this bank that advertises so much on Spanish media with ads that say people don’t need an ID to open an account could then make money off jailing those same people.”
A new report by the National People’s Action (NPA) and Public Accountability Initiative chronicles the role played by Wells Fargo in lending and investing in the private prison industry. Based on public record financial filings, the report argues that no other bank has played as critical a role in helping finance the three largest private prison companies: Corrections Corporation of America (CCA), GEO Group and Management & Training Corp.
Wells Fargo is the fourth largest bank holding company in the country and was involved in the $25 billion settlement against improper foreclosures.
“Wells Fargo’s ties to the three major private prison companies suggest that the company does not have a casual relationship with the industry, as it has argued in the media,” said George Goehl, executive director of NPA, “but rather that it has sought out a profitable relationship with the private prison industry, regardless of the industry’s record of irresponsibility and unethical practices.”
The rapidly expanding private prison industry owes much of its growth to the rise in immigration detention. The Detention Watch Network estimates that between 2005 and 2010, the number of immigrants detained doubled, at a cost of $1.77 billion. About half of the roughly 400,000 undocumented immigrants held in civil detention centers are in privately run centers, along with about 8 percent of federal and state inmates.
CCA and GEO Group’s annual revenue, including their US and overseas operations, came to a combined $3.3 billion in 2011. The report notes that the industry is capital-intensive and requires “enormous amounts of financing” to maintain a steady cash flow. It details the credit the companies receive, how much interest Wells Fargo receives from the banks holdings and stock owned in the companies.
According to the report, Wells Fargo, as its “syndication agent and issuing lender,” provides CCA with a $785 million line of credit. This was an increase on the $450 million line of credit CCA received before January 6, 2012. The bank also receives interest from CCA, which paid a total of $75.4 million in interest to all of its lenders in 2010, of which Wells Fargo received a percentage.
In addition, the report notes that Wells Fargo “owned 98,731 shares of CCA stock, worth over $2.9 million as of June 29, 2012 (the date of its last disclosure filing).” CCA is the largest private corrections company in the country.
Wells Fargo’s holdings in GEO Group are also in the millions, according to the report. The bank invested $95.5 million in GEO Group though its mutual funds and is a trustee for $300 million of the company’s corporate debt. It owns 4,201,468 shares of stock – 6.48 percent of the company. In addition, the report found that Wells Fargo manages its GEO Group holdings through several mutual fund companies.
“Of these companies, Wells Capital Management is the largest GEO Group shareholder, by far, with 4.15 million shares worth $94.5 million as of June 29, 2012. Most of this stake – over $60 million – is managed as part of the Wells Fargo Advantage Small Cap Value Fund,” the report noted.
Management & Training Corporation (MTC), which houses 29,000 inmates at 22 facilities, has a credit agreement with Wells Fargo. The report says Well s Fargo may be the only lender to MTC; because it is a privately-held company, the report notes that its financial information is less accessible.
One troubling aspect of Wells Fargo’s involvement, says the report, is that it feeds the cycle that continues high rates of incarceration in private facilities:
This cycle involves profiting from the detention of vulnerable immigrant communities by understaffing the prisons and cutting costs so that basic food and medical needs are not met. The private prisons then use the profits to attract additional capital and investment, and invest in lobbying and other political efforts to win prison contracts and laws that result in higher levels of immigrant detention, which translates into increased profits from increased detention, and so on.
Among other uses of this money are lobbying expenditures. Numbers compiled by the Detention Watch Network show that CCA has not spent less than $1.8 million on lobbying since 2003, primarily for harsher immigration and criminal penalties. CCA is also a member of the American Legislative Exchange Council (ALEC) and was involved in the creation of Arizona’s immigration law (SB 1070).
A 2004 article on Wells Fargo and its banking practices predicted that one of its fastest growing markets would be Mexican-Americans and Mexicans in the Southwest US, and noted that the bank was already tailoring its products to accommodate this group.
In particular, Wells Fargo’s regional president, Shelley Freeman, told BusinessWeek, “One of Wells’s most crucial means to grow in the Hispanic market is our acceptance of the ‘matricula’ card – a form of identification issued to Mexican nationals by the consulates – as a valid form of identification to open a checking account. We started accepting the matricula card in November, 2001. Since then, we’ve opened 250,000 new accounts from people using the card as ID.”
During the first three months of 2004, about 22,000 people a month opened Wells Fargo bank accounts using “matricula” cards.
The company also created a program with the Mexican branch of HSBC to send remittances; teamed up with the US Hispanic Chamber of Commerce to create a loan program for Hispanic business owners; and formed Wells Fargo Amigos, a 200-person group focused on building connections with the Latino community.
On its web site, under the title “Our Latino Heritage,” it writes: “Wells Fargo has served and employed Latinos since its founding in 1852. Our heritage of more than 150 years includes services both for and by the Spanish-speaking settlers of the West and the Americas. Wells Fargo’s people, places and business extended from the old ranchos of California, the rail lines of an emerging modern Mexico and offices throughout Central America and the Caribbean.”
Wells Fargo denies its connections to the private prison industry on its site, saying “Wells Fargo does not own any shares of the GEO Group or Corrections Corporation of America” but noting that “our mutual fund group, Wells Fargo Advantage Funds, currently has a holding in GEO Group. We serve as advisor for these funds for our customers, who are the owners. Wells Fargo does not own the shares for its own account.”
Emira Palacios, vice president of NPA’s Board of Directors and member of Sunflower Community Action in Kansas, wrote in response to Wells Fargo’s denial of its connection with private prisons: “It is understandable that Wells Fargo would try to distance itself from private prisons considering they are tearing Latino communities apart by spending millions of dollars on lobbying to keep the immigration and criminal justice systems broken. Wells Fargo, after all, is trying to make inroads into the Latino market, and it knows full well that being a known as the financier and partial owner of the prisons that profit from incarcerating immigrants is not a winning marketing message.”
Calls for Divestment
The report ends by calling for Wells Fargo to acknowledge its role in the private prison industry and end its relationship with the Corrections Corporation of America, GEO Group and Management & Training Corporation.
This isn’t the first time Wells Fargo has been on the wrong side of the divestment debate, but its past shows there is hope, writes the report:
“Wells Fargo has given in to calls for divestment in the past. In 1977, a spokesman for Wells Fargo told the Los Angeles Times that though the bank ‘thoroughly abhors apartheid,’ they would still make loans to South Africa, as loans were judged ‘on the ability of the borrower to repay and the purpose for which the loan is to be used, rather than on whether the bank liked the recipient country’s political stance.’ By 1985, under multilateral pressure, Wells Fargo had not only stopped lending to the South African government and its agencies, but also announced that it would not renew loans or make new loans until apartheid had ended.”
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