Ex-Wells Fargo executive agrees to $4.9 million settlement with SEC

LOUIS LANZANO/Bloomberg

Carrie Tolstedt, a former senior Wells Fargo executive who faces the prospect of prison time in connection with the bank's phony-accounts scandal, has reached a $4.9 million settlement with the Securities and Exchange Commission.

The deal with the SEC, which comes nearly seven years after Tolstedt left Wells Fargo, is the latest in a series of moves aimed at resolving her long-running legal woes.

In March, federal prosecutors announced that Tolstedt had agreed to plead guilty to a criminal charge of obstructing a bank examination under a deal that called for a prison sentence of up to 16 months. A separate settlement agreement with the Office of the Comptroller of the Currency called for Tolstedt to pay a $17 million fine and accept a ban from the banking industry.

On Tuesday, the SEC touted its settlement with Tolstedt as an example of an enforcement case that targeted individual executives, rather than just the corporations that employed them.

"Companies do not act on their own," Monique Walker, regional director of the SEC's regional office in San Francisco, said in a press release. "Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws."

Tolstedt's lawyer, Enu Mainigi, did not respond to a request for comment. Before Tolstedt's guilty plea in the criminal case, Mainigi had said that her client acted appropriately, transparently and in good faith at all times. Tolstedt is scheduled to be sentenced in September.

In March, the SEC revealed in a court filing that it had reached a tentative settlement with Tolstedt, but details of the agreement did not become public until Tuesday.

The settlement has yet to be approved by a judge, and Tolstedt did not admit or deny wrongdoing.

Tolstedt agreed to pay a $3 million civil penalty, plus disgorgement of $1.46 million and prejudgment interest of just under $450,000. She also consented to a permanent ban from serving as an officer or director at publicly traded companies.

Tolstedt, the longtime head of retail banking at Wells Fargo, was a key architect of the San Francisco bank's aggressive sales culture, widely seen as a major culprit for the phony-accounts scandal. Tolstedt frequently trumpeted the bank's cross-sell ratio, which rose for years, and which Wells Fargo touted to Wall Street as evidence of its sales prowess.

The SEC sued Tolstedt in November 2020, alleging that she misled investors about the cross-sell ratio. The metric was inflated by including accounts that were opened without customers' permission, as well as by counting accounts that customers didn't want and didn't use, the SEC alleged.

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The SEC also sued John Stumpf, the former Wells Fargo CEO, in connection with the cross-sell ratio. But at the outset of the case, Stumpf agreed to settle by paying a $2.5 million penalty.

Wells Fargo had previously agreed to pay $500 million to the SEC — and $2.5 billion to the Department of Justice — to settle charges related to the fake-accounts scandal. A Wells Fargo spokesperson declined to comment on the SEC's settlement with Tolstedt.

The SEC said that it will distribute the money paid by Tolstedt, as well as the amounts previously collected from Stumpf and Wells Fargo, to harmed investors.