Carrie Tolstedt, the former head of Wells Fargo’s retail banking division, has agreed to plead guilty to obstructing a government examination of the bank’s misconduct.
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Wells Fargo’s scandalous practice of billing customers for unauthorized accounts could send a former top executive to prison and already has saddled her with millions of dollars in fines.
Under an agreement announced Wednesday in the California federal courts, Carrie Tolstedt, the longtime head of Wells Fargo’s retail banking division, agreed to plead guilty to obstructing a government examination of the bank’s misconduct.
Tolstedt, 63, faces up to 16 months in prison, a $100,000 fine and three years of supervised release, according to her plea agreement.
In a separate civil settlement also announced Wednesday, Tolstedt has also been banned from working in the banking industry and must pay a $17 million penalty.
She is expected to make her first appearance on the criminal charge in the Los Angeles federal courts on April 7. Her plea agreement must be approved by a judge.
“Today’s plea agreement holds the defendant accountable for her role in obstructing the examination into the unlawful sales practices at Wells Fargo, which deceived millions of clients who placed their trust in the institution,” said Acting Inspector General Tyler Smith of the Federal Deposit Insurance Corp., Office of Inspector General, in a statement that followed the announcement of Tolstedt’s upcoming criminal plea.
Wells Fargo, based in San Francisco, maintains a massive financial and employment presence across the Charlotte area, with some 27,000 employees. It came to North Carolina in 2008 with the purchase of Wachovia.
Anatomy of a scandal
For more than a decade, Tolstedt served as the bank’s senior executive vice president of community banking, overseeing Wells Fargo’s consumer and small business retail business.
The Community Bank, which Tolstedt also directed, managed such products as checking and saving accounts, CDs, debit cards and other products.
But to meet excessive sales goals, thousands of Community Bank employees opened millions of accounts and other financial products from 2002 to 2016 that were unauthorized or fraudulent, prosecutors say.
In short, the bank’s customers did not want the products or know about them.
Yet Wells Fargo collected millions of dollars in fees and interest, damaged their customers’ credit ratings and unlawfully used sensitive personal information to both grow and hide the fraud.
Bank employees forged customer signatures, created phony PINs, and moved millions of dollars from actual accounts to the phony ones, practices known internally by bank employees as “gaming.”
Tolstedt, according to the plea agreement, became aware of the practices by 2004.
While the Community Bank under her watch eventually took steps to identify the sales misconduct, it did not look very hard. According to prosecutors, for every bank employee flagged internally for improper sales, more than 100 conducting the same frauds were never examined.
In May 2015, when banking regulators had begun examining Wells Fargo’s sales practices, Tolstedt contributed to an attempted cover-up that significantly downsized the scope of the scandal, according to Wednesday’s court filing.
Prosecutors say she helped prepare a memo that failed to disclose the actual number of employees fired or resigned for sales misconduct, or the tiny fraction of bank workers who were flagged internally.
Tolstedt retired from the bank in 2016.
In 2020, Wells acknowledged its misconduct by agreeing to pay a $3 billion fine to settle civil and criminal allegations with the U.S. Attorney’s Offices in Los Angeles and Charlotte, which continue to prosecute the case.
That same year, Tolstedt was still proclaiming her innocence.
“Ms. Tolstedt acted appropriately, transparently and in good faith at all times,” her attorney said. “We look forward to setting the record straight and clearing her name.”
This story was originally published March 15, 2023, 5:37 PM.
