Disgraced former Wells Fargo executive Carrie L. Tolstedt has avoided prison time after pleading guilty for her role in the massive phony accounts scandal that roiled the bank in 2016.
Between 2002 and 2016, Wells Fargo employees opened some two million deposit and credit card accounts without the customers’ approval or knowledge, in order to pump up key performance metrics, an investigation found.
At a hearing on Friday in Los Angeles, Tolstedt, 63, was sentenced to three years of probation, including six months of home confinement, by US District Judge Josephine Staton.
In addition, she will pay a $100,000 criminal fine and serve 120 hours of community service, on top of $20 million in civil penalties levied by federal regulators.
Wells Fargo previously clawed back about $67 million from Tolstedt’s $125 million retirement package — leaving her with a golden parachute of $58 million before civil and criminal penalties.
Disgraced former Wells Fargo executive Carrie L. Tolstedt has avoided prison time after pleading guilty for her role in the massive phony accounts scandal
Between 2002 and 2016, Wells Fargo employees opened some two million deposit and credit card accounts without the customers’ approval or knowledge, an investigation found
Tolstedt pleaded guilty in March to obstructing a bank examination in relation to the phony account scandal, which cost Wells Fargo $3 billion to settle federal civil and criminal probes.
Prosecutors had called for her to serve a year in federal prison, writing in a motion: ‘corporate wrongdoers must be sent a clear message that maintaining a lucrative position through criminal behavior is not worth the risk.’
The probation sentence handed down on Friday reflected the punishment sought by Tolstedt’s attorneys, who did not immediately respond to a request for comment from DailyMail.com on Saturday.
The statutory maximum sentence for obstruction of a bank examination is five years in federal prison, but Tolstedt’s plea agreement called for a prison sentence no longer than 16 months.
In a separate settlement with the Office of the Comptroller of the Currency, Tolstedt agreed to a lifetime ban from the banking industry and a $17 million civil penalty.
Tolstedt also agreed in May to pay a $3 million penalty to settle a Securities and Exchange Commission civil case, without admitting or denying the allegations.
The SEC accused her of misleading investors about the success of Wells Fargo’s core business, which involved dubious sales practices used to inflate key performance metrics.
From mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s ‘cross-sell metric’ as a means of measuring the bank’s financial success despite the fact that it was inflated by accounts and services that were unused, unneeded, or unauthorized, according to the SEC.
Wells Fargo previously clawed back about $67 million from Tolstedt’s $125 million retirement package — leaving her with $58 million before civil and criminal penalties
The scandal also toppled former Wells Fargo CEO John Stumpf (above at a 2016 Senate hearing), who once called Tolstedt the ‘best banker in America’
Before the scandal broke, Wells Fargo was considered to have a sterling reputation among the big banks.
The bank referred to its branches as ‘stores,’ and once had a policy of trying to get each Wells Fargo customer to have eight financial products with the company.
The bank’s sales policies, pushed by top management, were aggressive and unrealistic, according to regulators.
Bank employees were berated for not making bloated sales quotas, which ultimately resulted in many employees gaming Wells Fargo’s sales system in order to meet these artificial sales goals.
For example a number of Wells Fargo customers, notably the elderly, were signed up for online banking when they did not have Internet access.
The documents that laid out the charges against Wells Fargo leaned heavily on the behavior of ‘Executive A,’ described as the head of Wells’ community bank business and the regional bank division from 2002 until 2017.
Tolstedt held those positions during that time period.
The scandal also toppled former Wells Fargo CEO John Stumpf, who once called Tolstedt the ‘best banker in America.’
Stumpf paid a $17.5 million civil fine in 2020, and accepted a lifetime ban from the banking industry.
As a result of the scandal, Wells Fargo remains under a Federal Reserve assets cap that limits the bank’s growth, though it is still the fourth-largest US bank.
Since the scandal broke, Wells Fargo has reformed its compensation practices and no longer bases employee pay on selling additional accounts to customers.
The bank has also replaced its chief executive twice, most recently with former Bank of New York Mellon chief Charlie Scharf, who has signaled he plans significant changes to try to win back the trust of regulators.