A former prime Wells Fargo govt is probably going headed to jail for her position within the sham accounts scandal that engulfed the financial institution six years in the past.
Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, agreed to plead responsible to a felony cost of obstructing a financial institution examination, the Justice Division mentioned on Wednesday. The crime carries a most sentence of 5 years in jail. Ms. Tolstedt’s plea settlement requires a sentence of as much as 16 months, the company mentioned.
She is the primary high-ranking Wells Fargo govt to be criminally charged for the financial institution’s actions.
Ms. Tolstedt ran Wells Fargo’s banking branches in the course of the years that the financial institution opened what might have been tens of millions of sham financial institution accounts, a scandal that burst into public view in 2016 and toppled two successive chief executives. Ms. Tolstedt, 63, had persistently denied any wrongdoing. She retired from the financial institution shortly earlier than its misdeeds grew to become public, and was later retroactively fired for trigger.
Ms. Tolstedt knowingly turned a blind eye to indicators that financial institution workers have been utilizing unlawful ways to satisfy the financial institution’s aggressive gross sales targets, in line with prosecutors. In 2015, because the Workplace of the Comptroller of the Foreign money scrutinized the financial institution’s gross sales ways, Ms. Tolstedt helped put together a memo through which she hid particulars in regards to the scope and scale of the inner issues, they mentioned.
“Obstructing an investigation compromises the mission of these looking for the reality, and we are going to maintain accountable any particular person who makes an attempt to hide wrongdoing,” mentioned Joseph T. McNally, the appearing U.S. legal professional for the central district of California.
Ms. Tolstedt’s lawyer, Enu Mainigi, declined to touch upon the costs. A Wells Fargo spokeswoman additionally declined to remark.
Bartlett Naylor, a monetary coverage advocate on the activist group Public Citizen, mentioned he was happy a banker chargeable for “one of many largest frauds in U.S. historical past” could be going to jail.
“However Tolstedt had bosses,” Mr. Naylor added. “Justice won’t be full till they face the same penalty.”
A spokesman for Mr. McNally’s workplace declined to touch upon whether or not federal prosecutors have been pursuing circumstances towards different Wells Fargo executives. Ms. Tolstedt’s former boss, John Stumpf — the financial institution’s chief govt from 2007 to 2016 — has not confronted felony prices. In 2020, he paid a $17.5 million effective and accepted a lifetime ban from the banking trade to settle civil prices introduced by the O.C.C.
Ms. Tolstedt on the time selected to struggle the O.C.C.’s prices towards her. On Wednesday, the company introduced that she pays $17 million to settle these prices — lower than the $25 million penalty the regulator had beforehand sought.
The Securities and Alternate Fee can also be pursuing litigation towards Ms. Tolstedt for deceptive traders in regards to the financial institution’s gross sales ways and monetary well being. On Wednesday, a lawyer for the fee notified the federal decide listening to the case that the company has obtained, and can advocate that the fee settle for, a deal to settle the case. No particulars in regards to the settlement’s phrases have been included.
Wells Fargo has paid billions in fines for opening accounts with out prospects’ authorization and different misdeeds, together with a $1.7 billion effective imposed late final yr by the Client Monetary Safety Bureau for errors in recording residence and auto mortgage funds — errors that led to some prospects’ properties being wrongfully seized.
The financial institution has struggled to reform itself. Mr. Stumpf’s successor as chief govt, Timothy J. Sloan, resigned below strain in 2019, and since 2018 the financial institution has operated below a draconian asset-cap restriction imposed by the Federal Reserve that sharply limits its progress.
Wells Fargo’s present chief govt, Charles W. Scharf, advised analysts in January that the financial institution was nonetheless working to scrub itself up and appease its regulators.
“Whereas our danger and regulatory work hasn’t at all times adopted a straight line and we now have extra to do, we’ve made vital progress,” he mentioned. “We’ll proceed to prioritize our work right here.”
