FuGuo bankProsecutors said the bank’s former head of retail banking should serve a year in prison for blocking an investigation into the bank’s efforts to open accounts for millions of customers without their authorization.
Carrie L. Tolstedt, the only executive at the bank to be charged with criminal misconduct over the 2016 fake-account scandal, agreed this year to plead guilty to obstructing the investigation. Now, the judge handling the case must decide what severe punishment to impose on her. The Los Angeles U.S. Attorney’s Office commented late Friday.
Prosecutors said in a court filing that Tolstedt “attempted to conceal from regulators one of the largest banking scandals in modern history.” “A clear message must be sent to corporate wrongdoers: maintaining a lucrative position through criminal behavior is not worth the risk.”
Wells Fargo paid a $3 billion fine in 2020 over its widespread practice of opening checking and credit accounts without customers’ authorization to meet aggressive sales targets. The bank said it found that employees may have created 3.5 million fake accounts. Wells Fargo has also been embroiled in other consumer disputes over unwanted auto insurance, mortgage and overdraft fees. After the scandal, it promised improvements.
The U.S. Attorney’s Office believes that the U.S. Probation Service’s recommendation that Tolstedt serve three years of probation does not reflect the seriousness of her crimes.
Tolstedt’s attorney, Enu Mainigi, did not immediately respond to an email seeking comment outside normal business hours. Lawyers will have the opportunity to offer alternatives to the prosecutor’s recommendation.
Prosecutors said Tolstedt stymied the OCC investigation by failing to disclose statistics on the number of employees who had been fired or resigned pending an investigation for misconduct in sales. She also failed to disclose that the bank proactively investigated only a handful of employees who engaged in what was flagged as potential sales misconduct, according to the government.
In the plea agreement, Tolstedt agreed to be barred from working in the banking industry and to pay the OCC a $17 million civil penalty. She faces up to 16 months in prison under the agreement she signed.
The case is US v. Tolstedt, Case No. 23-cr-115, U.S. District Court for the Central District of California (Los Angeles).