MONEY & BUSINESS: Former Wells Fargo Executive Avoids Prison in Sham Accounts Scandal
A former top Wells Fargo executive avoided prison time for her role in the bank’s sham accounts scandal, after a federal judge on Friday instead sentenced her to six months of home confinement and three years of probation. She was also ordered to pay a $100,000 fine and perform 120 hours of community service.
The former executive, Carrie L. Tolstedt, who was head of retail banking at Wells Fargo, was the only high-ranking executive at the bank to be criminally charged for its misdeeds. She pleaded guilty this year to one criminal charge of obstructing a bank examination.
Prosecutors had sought a 12-month prison sentence, saying in a legal filing that imprisoning Ms. Tolstedt, 63, would be a “general deterrence to other executives who might find themselves tempted to skirt the truth.”
Ms. Tolstedt’s lawyers had pressed for probation, citing similar sentences in other cases and invoking Ms. Tolstedt’s “lifelong charitable works.” Both the prosecution and the defense also cited Ms. Tolstedt’s health issues, the details of which had been redacted from the public versions of legal filings, as a factor favoring leniency.
Ms. Tolstedt ran Wells Fargo’s retail branches during the years that the bank opened what may have been millions of fraudulent bank accounts, a scandal that burst into public view in 2016 and toppled two successive chief executives.
Although fairly few customers were directly harmed by the bank’s actions — its toll fell more heavily on employees, who faced intense pressure to break the law or risk being fired — the revelation focused regulators’ attention on Wells and led to the discovery of additional misdeeds. The bank has paid billions of dollars in fines, including a $3.7 billion penalty levied last year for acts including wrongfully repossessing some borrowers’ cars and homes and charging overdraft fees even when customers had enough money to cover their purchases.
Ms. Tolstedt had consistently denied any wrongdoing in the sham accounts issue. She had retired from the bank shortly before its actions became public, and she was later retroactively fired for cause.
Ms. Tolstedt “fully accepts responsibility for her offense, and recognizes it was wrong,” her lawyers wrote in a pre-sentencing filing. In March, she agreed to pay $17 million to settle civil charges brought against her by the Office of the Comptroller of the Currency.
Ms. Tolstedt was sentenced by Judge Josephine Staton, in Los Angeles. A spokesman for the U.S. attorney for the central district of California declined to comment on the sentence. Ms. Tolstedt’s lawyer also declined to comment.
Wells Fargo is still haunted by the consequences of its succession of scandals. Since 2018, it has operated under a draconian asset-cap restriction imposed by the Federal Reserve that sharply limits its growth. That restriction “is a statement of the reality that we still have more work to do,” Charles Scharf, the San Francisco-based bank’s chief executive, told analysts on a call in July. He added, “It’s critical that we continue on our road to complete that work.”