Carrie Tolstedt, the former head of retail banking at Wells Fargo, has agreed to plead guilty to a criminal charge of obstructing a bank examination in connection with the company's phony-accounts scandal, prosecutors said Wednesday.
The plea agreement could lead to prison time for Tolstedt — a rare outcome for a high-ranking big-bank executive accused of wrongdoing. The deal, which has yet to be approved by a judge, calls for a sentence of up to 16 months behind bars, the U.S. Attorney's Office in the Central District of California said in a press release.
The charge of obstructing a bank examination relates to Tolstedt's participation in the preparation of a May 2015 memo, which was to be provided to the Office of the Comptroller of the Currency. Around that time, the Los Angeles City Attorney's Office filed suit against Wells, and the bank's regulators were scrambling to assess the extent of the fake-accounts problem.
In the memo, Tolstedt failed to disclose statistics on the number of Wells Fargo employees who were terminated or resigned for sales-related misconduct, according to prosecutors. She also failed to note that the company's retail banking unit proactively investigated only a very small percentage of employees who engaged in activity flagged as potential misconduct, the prosecutors said.
"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," acting U.S. Attorney Joseph McNally said in the press release. "Obstructing an investigation compromises the mission of those seeking the truth, and we will hold accountable any individual who attempts to conceal wrongdoing."
Also on Wednesday,
In addition, the Securities and Exchange Commission said that it has reached a tentative settlement with Tolstedt on other civil charges.
Tolstedt's lawyer, Enu Mainigi, did not respond Wednesday to a request for comment. Mainigi had 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 message CEO Charlie Scharf sent to the bank's employees 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," Scharf said in the January 2020 statement. "This was inexcusable. Our customers and you all deserved more from the leadership of this Company."
Tolstedt, 63, 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.
Over a 13-year period,
Investigations later concluded that low-level employees resorted to dishonest tactics in order to meet unrealistic sales goals, and in order to avoid being fired.
Tolstedt, who left Wells Fargo in 2016 and now lives in Scottsdale, Arizona, is expected to make her initial court appearance in Los Angeles in the coming weeks. Prosecutors said that the parties have requested an April 7 court date.
The statutory maximum for obstruction of a bank examination is five years in federal prison, according to prosecutors. They said that they believe the 16–month sentence is at the high end of the sentencing range for the offense, and that the court must accept or reject all aspects of the plea agreement. If the court rejects the deal, any party can withdraw from it, prosecutors said.
In the aftermath of the 2008 financial crisis, the Department of Justice faced criticism for failing to bring criminal charges against high-level executives at large banks.
In the SEC's civil case, the agency 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.
On Wednesday, the SEC informed a federal judge that Tolstedt has provided a signed offer to settle the case, and that agency lawyers will recommend that the commission accept the offer. No details about the settlement offer were immediately available.
The civil penalties announced by the OCC on Wednesday 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 the OCC's civil case, the agency alleged that
In
The report also called Tolstedt "insular and defensive," "obsessed with control" and "extremely reluctant to make changes."
Between 2010 and 2016, the San Francisco bank paid Tolstedt a total of $62.2 million, split between salary, bonuses and long-term incentive pay, according to regulatory filings. In 2017, Wells Fargo said that it had clawed back $67 million in compensation from Tolstedt.
