Former Wells Fargo executive Carrie Tolstedt was sentenced to three years’ probation on Friday for her role in the bank’s sprawling fake-accounts scandal.
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Tolstedt had agreed to plead guilty to the criminal charge of obstructing regulators’ investigation of the bank, which she left in 2016 as the scandal burst into the public arena. Her lawyers argued for her to be sentenced to probation, including six months of home confinement, rather than the 12-month prison sentence sought by prosecutors.
Wells Fargo has spent billions of dollars over the past eight years to settle allegations related to the accounts scandal, in which Tolstedt played a key role.
As head of Wells Fargo’s community bank, Tolstedt oversaw an aggressive “cross-selling” strategy that resulted in more than 2 million fake bank and credit card accounts being opened without customers’ consent or knowledge.
Regulators said Tolstedt and the bank’s former CEO, John Stumpf, bragged to investors about the scale of the community bank’s open accounts, despite the fact that millions of accounts were fabricated by employees trying to meet unrealistic sales goals set by management.
Tolstedt signed off on the accuracy of Wells Fargo’s public disclosures “when she knew or was reckless in not knowing” that statements about the bank’s cross-sell metric were “materially false and misleading,” the Securities and Exchange Commission said when it charged Tolstedt and Stumpf in 2020.
Stumpf was banned from the banking industry and paid a $17.5 million fine as part of a settlement with the Office of the Comptroller of the Currency.
Tolstedt, the only Wells Fargo executive to face criminal charges in the scheme, paid $17 million to settle a civil case with the the OCC, and $3 million to settle with the SEC.
She received a $125 million retirement package when she left Wells Fargo, though the bank has clawed back about $67 million of that.
Prison sentences for such high-level executives are rare. Only one Wall Street player served time for activities that led to the 2008 financial crisis. The last high-level executive to face prison time for financial crimes was former Enron CEO Jeff Skilling, who served 12 years in prison following the energy giant’s collapse in 2001.
Wells Fargo has struggled to get its house in order since the fake account scandal. In 2018 the Fed imposed a cap on Wells Fargo’s assets — essentially barring it from increasing its balance sheet until it addresses the compliance failures that led to the scandals.
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