Ex-Wells Fargo executive Carrie Tolstedt agrees to $17 million fine

LOUIS LANZANO/Bloomberg

Carrie Tolstedt, the former head of retail banking at Wells Fargo, has agreed to pay a $17 million fine to bank regulators over her role in the bank's phony-accounts scandal, and has also reached a tentative settlement with the Securities and Exchange Commission.

Under a settlement announced Wednesday by the Office of the Comptroller of the Currency, Tolstedt acceded to a ban from the banking industry, in addition to agreeing to pay the eight-figure penalty. Tolstedt, who left Wells Fargo in 2016, did not admit or deny wrongdoing.

Also on Wednesday, the SEC informed a federal judge that Tolstedt has provided a signed offer to settle a case, and that agency lawyers will recommend that the commission accept the offer. No details about the SEC settlement offer were immediately available.

Tolstedt was a key architect of Wells Fargo's aggressive sales culture, which focused on cross-selling additional products to existing customers. She frequently trumpeted the bank's cross-sell ratio, which rose for years, and which Wells Fargo touted to Wall Street as a way to differentiate itself from other banks.

In a 2020 lawsuit, the SEC accused Tolstedt of committing fraud, alleging that she publicly endorsed the cross-sell ratio as a means of measuring the bank's financial success, even though she knew that it had numerous flaws.

The civil penalties announced Wednesday by the OCC are similar to those that the agency extracted from former Wells Fargo CEO John Stumpf in 2020. Stumpf agreed to a $17.5 million fine and a ban from the industry.

In a 2020 charging document, the OCC alleged that Tolstedt failed to adequately perform her duties, which contributed to sales misconduct dating back all the way to 2002. The OCC had originally sought to force her to pay a $25 million fine.

Tolstedt's lawyer, Enu Mainigi, did not immediately respond Wednesday to a request for comment. Mainigi has previously said that her client acted appropriately, transparently and in good faith at all times.

A Wells Fargo spokesperson declined to comment, but pointed to a statement the bank released on the same day that the civil charges against Tolstedt and other former Wells executives were announced.

"At the time of the sales practices issues, the Company did not have in place the appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct," the bank said in its January 2020 statement. "This was inexcusable. Our customers and you all deserved more from the leadership of this Company."

Wells Fargo has also previously announced $67 million in clawbacks from Tolstedt.

Over a 13-year period, Wells Fargo opened 18.2 million checking and savings accounts that had zero customer-initiated transactions — or about 10% of the total accounts opened during that time period — according to a review that the bank conducted of its own internal systems.

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Investigations later concluded that the low-level employees resorted to dishonest tactics in order to meet unrealistic sales goals, and in order to avoid being fired.

In a 2017 report by a special committee of Wells Fargo's board, Tolstedt was accused of misleading the board's risk committee two years earlier about the scope of the sales problems.

The report also called Tolstedt "insular and defensive," "obsessed with control" and "extremely reluctant to make changes."