Wells Fargo & Co.’s former head of retail banking avoided prison for misleading regulators investigating one of the biggest banking scandals in modern US history, as a judge imposed a sentence of three years of probation.
(Bloomberg) — Wells Fargo & Co.’s former head of retail banking avoided prison for misleading regulators investigating one of the biggest banking scandals in modern US history, as a judge imposed a sentence of three years of probation.
Carrie L. Tolstedt, 63, the only Wells Fargo executive to be charged in the fake-accounts scandal of 2016, had pleaded guilty to obstruction of a bank examination by the Office of the Comptroller of the Currency.
US District Judge Josephine Staton on Friday agreed with the US Probation Office and Tolstedt’s lawyers on sentencing the former executive to probation because she doesn’t pose a danger to society. The judge rejected a request from prosecutors for a 12-month prison term and instead ordered Tolstedt to serve six months of home confinement, pay $100,000 fine and perform 120 hours of community service.
Tolstedt, who left the bank in 2016, was at the center of the scandal involving thousands of Wells Fargo employees who attempted to meet their sales goals by using customers’ personal information without consent. They opened millions of phony accounts or persuaded customers to open accounts the employees knew were of little or no use to them.
It was the first of several scandals that embroiled the bank, setting off leadership shakeups that ended up with the hiring of Chief Executive Officer Charlie Scharf, who joined the firm in 2019 after a string of predecessors stepped down. Wells Fargo paid more than $5 billion in fines and legal settlements and avoided criminal charges.
Read More: Ex-Wells Fargo Exec Deserves Prison in Accounts Scandal, US Says
At Friday’s sentencing hearing, Tolstedt’s attorney, Enu Mainigi, urged the judge to spare her client from being sent to prison, saying she’s been punished enough. Tolstedt lost countless friends, received harassing phone calls and will live the remainder of her life as a felon, Mainigi said. She also has a life-threatening health condition, the lawyer said.
Tolstedt addressed the judge, her voice breaking, saying she sincerely apologizes.
‘Honorable Life’
“It is my commitment to lead an honorable life,” she told Staton.
Staton said she has a responsibility to impose a sentence that’s sufficient, “but no more than necessary.”
“The sales practices conduct is serious because it was systematic and wide spread,” the judge said, adding that a single individual shouldn’t carry the full burden of such widespread conduct.
“It can’t be laid entirely at Ms. Tolstedt’s feet,” Staton said.
Tolstedt wept after the sentence was imposed, hugged her attorneys and shook hands with the prosecutors, smiling through tears.
Industry Ban
In her plea deal, Tolstedt agreed to a ban on working in the banking industry and to pay $21 million in civil penalties to the OCC and US Securities and Exchange Commission.
Tolstedt had admitted to preparing a memo she knew would be given to the OCC — an agency tasked with ensuring that banks operate in a safe and sound manner — and withholding information on the number of bank employees who were fired or resigned amid investigations of the sales-related misconduct.
She also failed to disclose that an internal probe looked at only a tiny percentage of the employees whose behavior raised red flags, according to prosecutors.
Read More: Wells Fargo $1 Billion Accord Over Fake Accounts Approved
“In a vacuum, submitting a misleading memo to regulators may not appear to be the most egregious offense,” prosecutors wrote in a Sept. 1 filing arguing for a prison sentence. “But taken in context, it is a serious offense, one intended to cover up the scope of one of the most significant banking scandals of the century.”
Prosecutors noted Tolstedt left the bank with about $125 million in stock, options and restricted shares, although the bank clawed back more than $65 million in stock options. That doesn’t include the millions she was paid each year as head of the retail banking division, prosecutors said.
The case is US v. Tolstedt, 23-cr-115, US District Court, Central District of California (Los Angeles).
(Updates with sentencing hearing dialog)
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