Former Wells Fargo executive Carrie Tolstedt should spend a year behind bars for interfering with an investigation tied to the bank’s 2016 fake accounts scandal, the U.S. Attorney’s office in Los Angeles said Friday.
Tolstedt pleaded guilty in March to obstructing a bank examination and is the only Wells Fargo executive to be criminally charged. She was fined $17 million by the Office of the Comptroller of the Currency in March and $5 million by the Securities and Exchange Commission in May.
According to a Bloomberg report citing court documents, Tolstedt “attempted to conceal from regulators one of the biggest banking scandals in modern history,” according to prosecutors. “Corporate wrongdoers must be sent a clear message that maintaining a lucrative position through criminal behavior is not worth the risk.”
Wells Fargo settled with the Department of Justice and the SEC in 2020 for $3 billion, admitting at the time that it had “collected millions of dollars in fees and interest to which the Company was not entitled, harmed the credit ratings of certain customers, and unlawfully misused customers’ sensitive personal information, including customers’ means of identification.”
Tolstedt, who at the time was Wells Fargo’s retail-banking chief, publicly endorsed the bank’s “cross-sell metric” as a measure of success between 2014 to 2016, despite knowledge that the figures were distorted by unauthorized and unused accounts, many of which had been opened without account holders’ knowledge.
Tolstedt was aware that bankers opened such accounts to meet unrealistic sales goals, according to the DOJ. The DOJ said she’d learned about so-called “gaming” by sales staff a decade earlier.
Further, Tolstedt impeded an OCC investigation by not disclosing how many employees were fired or resigned for sales practice misconduct; and failed to tell the OCC that only some of those employees flagged for potential misconduct were investigated by the bank.
All told, as many as 3.5 million fake accounts were created by the bank throughout the scandal.
In March, Tolstedt agreed to a lifetime ban on working in the banking industry. Her former boss John Stumpf, who was CEO during the fake-accounts era, also agreed to a lifetime ban in 2020, though he faced no criminal charges.
Tolstedt’s lawyer, Enu Mainigi, didn’t immediately respond to a request for comment from Bloomberg on Friday; and a Wells Fargo spokesperson did not return a request for comment by Banking Dive.
