Former Wells Fargo Executive to Plead Guilty in Sham Accounts Scandal
A former top Wells Fargo executive is likely headed to prison for her role in the sham accounts scandal that engulfed the bank six years ago.
Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, agreed to plead guilty to a criminal charge of obstructing a bank examination, the Justice Department said on Wednesday. The crime carries a maximum sentence of five years in prison. Ms. Tolstedt’s plea agreement calls for a sentence of up to 16 months, the agency said.
She is the first high-ranking Wells Fargo executive to be criminally charged for the bank’s actions.
Ms. Tolstedt ran Wells Fargo’s banking branches during the years that the bank opened what may have been millions of sham bank accounts, a scandal that burst into public view in 2016 and toppled two successive chief executives. Ms. Tolstedt, 63, had consistently denied any wrongdoing. She retired from the bank shortly before its misdeeds became public, and was later retroactively fired for cause.
Ms. Tolstedt knowingly turned a blind eye to signs that bank employees were using illegal tactics to meet the bank’s aggressive sales targets, according to prosecutors. In 2015, as the Office of the Comptroller of the Currency scrutinized the bank’s sales tactics, Ms. Tolstedt helped prepare a memo in which she concealed details about the scope and scale of the internal problems, they said.
“Obstructing an investigation compromises the mission of those seeking the truth, and we will hold accountable any individual who attempts to conceal wrongdoing,” said Joseph T. McNally, the acting U.S. attorney for the central district of California.
Ms. Tolstedt’s lawyer, Enu Mainigi, declined to comment on the charges. A Wells Fargo spokeswoman also declined to comment.
Bartlett Naylor, a financial policy advocate at the activist organization Public Citizen, said he was pleased a banker responsible for “one of the largest frauds in U.S. history” would be going to prison.
“But Tolstedt had bosses,” Mr. Naylor added. “Justice will not be complete until they face a similar penalty.”
A spokesman for Mr. McNally’s office declined to comment on whether federal prosecutors were pursuing cases against other Wells Fargo executives. Ms. Tolstedt’s former boss, John Stumpf — the bank’s chief executive from 2007 to 2016 — has not faced criminal charges. In 2020, he paid a $17.5 million fine and accepted a lifetime ban from the banking industry to settle civil charges brought by the O.C.C.
Ms. Tolstedt at the time chose to fight the O.C.C.’s charges against her. On Wednesday, the agency announced that she will pay $17 million to settle those charges — less than the $25 million penalty the regulator had previously sought.
The Securities and Exchange Commission is also pursuing litigation against Ms. Tolstedt for misleading investors about the bank’s sales tactics and financial health. On Wednesday, a lawyer for the commission notified the federal judge hearing the case that the agency has received, and will recommend that the commission accept, a deal to settle the case. No details about the settlement’s terms were included.
Wells Fargo has paid billions in fines for opening accounts without customers’ authorization and other misdeeds, including a $1.7 billion fine imposed late last year by the Consumer Financial Protection Bureau for errors in recording home and auto loan payments — mistakes that led to some customers’ homes being wrongfully seized.
The bank has struggled to reform itself. Mr. Stumpf’s successor as chief executive, Timothy J. Sloan, resigned under pressure in 2019, and since 2018 the bank has operated under a draconian asset-cap restriction imposed by the Federal Reserve that sharply limits its growth.
Wells Fargo’s current chief executive, Charles W. Scharf, told analysts in January that the bank was still working to clean itself up and appease its regulators.
“While our risk and regulatory work hasn’t always followed a straight line and we have more to do, we’ve made significant progress,” he said. “We will continue to prioritize our work here.”
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