March 27, 2023

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Carrie Tolstedt of Wells Fargo pleads guilty and faces prison

Carrie Tolstedt of Wells Fargo pleads guilty and faces prison

A former Wells Fargo executive may be heading to prison for her role in the fake accounts scandal that engulfed the bank six years ago.

Tolstedt, the former head of retail banking at Wells Fargo, has agreed to plead guilty to a felony charge of obstructing a bank’s examination, the Justice Department reported Wednesday. The offense is punishable by a maximum of five years imprisonment. The agency said Tolstedt’s plea agreement provides for a sentence of up to 16 months.

She is the first high-ranking Wells Fargo executive to be criminally charged for the bank’s actions.

Ms. Tolstedt ran the banking branches of Wells Fargo during the years when the bank opened what may have been millions of bogus bank accounts, a scandal that erupted into public view in 2016 and toppled two successive CEOs. Ms. Tolstedt, 63, has consistently denied any wrongdoing. She retired from the bank shortly before his crimes became public, and was later dismissed retroactively due to a crime.

Ms. Tolstedt willfully turned a blind eye to signs that bank employees were using illegal methods to achieve the bank’s aggressive sales targets, according to prosecutors. In 2015, when the Office of the Comptroller of the Currency was scrutinizing the bank’s sales methods, Ms. Tolstedt helped prepare a memo in which she withheld details about the scope and scale of the internal problems, they said.

“Obstruction of the investigation threatens the mission of truth-seekers, and we will hold anyone who attempts to cover up wrongdoing to account,” said Joseph T. McNally, acting US Attorney for the Central District of California.

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Tolstead’s attorney, Eno Menegi, declined to comment on the charges. A Wells Fargo spokeswoman also declined to comment.

Bartlett Naylor, a fiscal policy advocate with the advocacy group Public Citizen, said he was pleased that a banker responsible for “one of the largest frauds in US history” went to prison.

“But Tolstedt had bosses,” added Mr. Naylor. “Justice will not be complete until they face a similar sentence.”

A spokesman for McNally’s office declined to comment on whether federal prosecutors are pursuing cases against the other Wells Fargo executives. Tolstead’s former boss, John Stumpf — the bank’s chief executive from 2007 to 2016 — never faced criminal charges. In 2020, he paid a $17.5 million fine and agreed to a lifetime ban from the banking industry to settle civil charges brought by OCC

Ms. Tolstedt chose at the time to fight the OCC charges against her. On Wednesday, the agency announced it would pay $17 million to settle those charges — less than the $25 million fine the regulator previously sought.

The SEC is also pursuing a lawsuit against Ms. Tolstedt for misleading investors about the bank’s sales methods and financial health. On Wednesday, attorneys for the commission notified the federal judge hearing the case that the agency had received and would recommend the commission accept a deal to settle the case. No details were provided on the terms of the settlement.

Wells Fargo has paid billions in fines for opening accounts without customers’ permission 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 — errors that have led to some Customers’ unjustly seized homes.

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The bank has struggled to reform itself. Stumpf’s successor as CEO, Timothy J. Sloan, resigned under pressure in 2019, and since 2018, the bank has been operating under strict asset limits imposed by the Federal Reserve that sharply limit its growth.

Charles W. Scharf, the current CEO of Wells Fargo, told analysts in January that the bank was still working to clean itself up and appease regulators.

“While our regulatory and risk work does not always follow a straight line and we have more to do, we have made significant progress,” he said. “We will continue to prioritize our work here.”