Carrie Tolstedt, 63, the former head of Wells Fargo’s community bank, has agreed to pay nearly $5 million to settle Securities and Exchange Commission charges that she facilitated a massive fraudulent cross-selling strategy at the bank without customers’ permission.
The settlement is subject to court approval and follows Tolstedt’s March agreement with the U.S. Department of Justice to plead guilty to obstructing a probe into the bank’s aggressive practice of opening millions of accounts for products that customers hadn’t approved.
Tolstedt, who worked at Wells Fargo for 27 years and was named by Fortune as “the most powerful banker in the U.S.” in 2015, faces up to 16 months in prison under the plea agreement, the DOJ said in a statement. Her sentencing is scheduled for September.
She also faces a $17 million civil penalty from the Office of the Comptroller of the Currency, which said Tolstedt was "significantly responsible" for the widespread sales abuses at the bank, where employees opened up more than two million accounts in order to meet aggressive sales goals.
Wells Fargo itself paid $3 billion in penalties in 2020 after the government brought a number of cases against the bank for its abusive cross-selling scheme.
“Companies do not act on their own. Where the facts warrant it, we will hold senior executives accountable for conduct that violates the securities laws,” Monique C. Winkler, head of the SEC’s San Francisco office, said in a statement.
Wells Fargo declined to comment on Tolstedt’s SEC settlement.
According to the SEC’s complaint against the veteran banker, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s cross-sell metric as a means of measuring Wells Fargo’s financial success “despite the fact that this metric was inflated by accounts and services that were unused, unneeded or unauthorized.”
The SEC also alleged that Tolstedt “was aware of misconduct at the community bank that led to bankers pushing products on customers that they did not need or want, including the unauthorized opening of accounts,” the SEC said.
The complaint further alleges that Tolstedt made misleading public statements to investors attesting to the bank’s cross-sell strategy at Wells Fargo’s investor conferences in 2014 and 2016 and signed misleading sub-certifications about the accuracy of Wells Fargo’s public disclosures “when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading,” the agency said.
As part of her settlement with the SEC, Tolstedt agreed to pay a $3 million civil penalty, and to disgorge $1,459,076 plus prejudgment interest of $447,874. The banker neither admitted nor denied guilt.
The SEC said it will combine the money it receives from Tolstedt with the $500 million paid by Wells Fargo and the $2.5 million penalty paid by its former CEO and Chairman John Stumpf in a previous settlement, and it will distribute the sum to harmed investors.
Tolstedt retired from Wells Fargo in September 2016 as the scandal went public. In response to an internal report, Wells Fargo retroactively fired Tolstedt for cause and revoked a total of $67 million in pay, or 54% of the total the bank had previously paid her as part of her $125 million retirement package, according to news reports.