Former Wells Fargo exec Tolstedt deserves prison in accounts scandal, US says

Wells Fargo & Co.’s former head of retail banking should spend a year in prison for impeding a probe of the bank’s practice of opening millions of accounts for customers without their authorization, prosecutors said.

Carrie L. Tolstedt, the only executive at the bank to be accused of criminal wrongdoing stemming from its fake-accounts scandal of 2016, agreed this year to plead guilty to obstructing the investigation. Now the judge handling the case must decide how severely she should be punished. The U.S. Attorney’s Office in Los Angeles weighed in late Friday.

Tolstedt “attempted to conceal from regulators one of the biggest banking scandals in modern history,” prosecutors said in a court filing. “Corporate wrongdoers must be sent a clear message that maintaining a lucrative position through criminal behavior is not worth the risk.”

Wells Fargo paid $3 billion in penalties in 2020 over its widespread practice of opening checking and credit accounts without customers’ authorization to meet aggressive sales goals. The bank said it found employees may have created 3.5 million bogus accounts. Wells Fargo has also been embroiled in other consumer spats over unwanted car insurance, mortgage lending and overdraft fees. It promised to improve in the wake of the scandals.

A recommendation by the U.S. Probation Office that Tolstedt serve a three-year term of probation doesn’t reflect the seriousness of her crime, the U.S. Attorney’s Office argued.

Enu Mainigi, Tolstedt’s lawyer, didn’t immediately respond to an email message outside regular business hours seeking comment. The attorney will get a chance to offer her alternative to prosecutors’ suggestion.

Tolstedt hindered an examination by the Office of the Comptroller of the Currency by failing to disclose statistics on the number of employees who were fired or resigned pending investigation for sales practices misconduct, prosecutors said. She also failed to disclose that the bank proactively investigated only a very small percentage of employees who engaged in activity flagged as potential sales practices misconduct, according to the government.

In her plea deal, Tolstedt agreed to a ban on working in the banking industry and to pay a $17 million civil penalty to the OCC. Under the agreement she signed, she faced as long as 16 months in prison.

The case is US v. Tolstedt, 23-cr-115, US District Court, Central District of California (Los Angeles).