A former top Wells Fargo executive is facing a prison sentence for her role in the sham accounts scandal that engulfed the bank six years ago after a plea agreement was secured by federal prosecutors in L.A. this week wherein she admits to her role in covering up the scheme.
Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, agreed to plead guilty to a criminal charge of obstructing a bank examination in an agreement filed Wednesday with federal prosecutors in California’s Central District. The 63-year-old is expected to make her initial court appearance in a hearing tentatively scheduled for April 7 in Los Angeles.
From approximately 2007 to September 2016, prosecutors say, Tolstedt was Wells Fargo’s senior executive vice president of community banking; she was also head of the Community Bank, which operated Wells Fargo’s consumer and small business retail banking business. Her division managed many of the products that Wells Fargo sold to individual customers and small businesses, including checking and savings accounts, CDs, debit cards, bill pay, and other products.
Under her direction, the bank used “excessive sales goals,” prosecutors say, to encourage its employees to open millions of sham bank accounts and other financial products that were unauthorized or fraudulent. “In the process, Wells Fargo collected millions of dollars in fees and interest. The bank had no entitlement to these funds and in turn harmed customers’ credit ratings and unlawfully misused their sensitive personal information, prosecutors said Wednesday.
Many of these practices were referred to within Wells Fargo as “gaming,” and included using existing customers’ identities, without their consent, to open the bogus accounts. Gaming practices included forging customer signatures, creating PINs to activate unauthorized debit cards, and moving money from millions of customer accounts to unauthorized accounts in a practice known internally as “simulated funding.”
Tolstedt was charged in connection with obstructing an investigation into the shady gaming practices, and in her plea agreement, she admitted to writing a memo that downplayed the number of Wells Fargo employees caught gaming. “She also failed to disclose that the Community Bank proactively investigated only a very small percentage of employees who engaged in activity flagged as potential sales practices misconduct,” prosecutors say.
“The justice system and regulators rely on corporations and their executives to fully cooperate during investigations into potential wrongdoing. But, in this case, Ms. Tolstedt took steps to cover up misconduct at Wells Fargo,” said Acting United States Attorney Joseph T. McNally. “Obstructing an investigation compromises the mission of those seeking the truth, and we will hold accountable any individual who attempts to conceal wrongdoing.”
Tolstedt is the first high-ranking Wells Fargo executive to be criminally charged for the bank’s now-notorious actions. Under the terms of her plea agreement, she could be sent to prison for up to 16 months; she also agreed to pay a $17 million fine and agree to a ban on working in the banking industry, prosecutors said. It remains unclear if Tolstedt’s former boss, John Stumpf, the bank’s chief executive from 2007 to 2016, has not faced criminal charges. In 2020, a civil case ended with him paying a $17.5 million fine and accepting a lifetime ban from the banking industry.
Wells Fargo admitted to its misconduct in 2020 and paid a $3 billion penalty in connection with agreements reached with the United States Attorneys’ Offices for the Central District of California and the Western District of North Carolina, the Justice Department’s Civil Division, and the Securities and Exchange Commission.
Stay on top of the latest in L.A. news, food, and culture. Sign up for our newsletters today.