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Carrie L. Tolstedt, the former head of retail banking at Wells Fargo & Co., was sentenced to three years of probation on Friday, avoiding a possible prison sentence for her role in the bank’s fake-accounts scandal. This comes as a significant setback for federal prosecutors, who aimed to set a precedent by incarcerating a high-ranking big-bank executive.
Tolstedt, 63, pleaded guilty earlier this year to a charge of obstructing a bank examination by the Office of the Comptroller of the Currency. She was the only Wells Fargo executive charged in relation to the scandal that emerged in 2016, where employees used customers’ personal information without consent to open millions of phony accounts or convinced customers to open accounts they knew were unnecessary.
US District Judge Josephine Staton agreed with the US Probation Office and Tolstedt’s lawyers on sentencing her to probation as she doesn’t pose a danger to society. The judge rejected prosecutors’ request for a 12-month prison term. Instead, Tolstedt will serve six months of home confinement, pay a $100,000 fine, and perform 120 hours of community service.
In addition to her probation sentence, Tolstedt has already faced severe financial penalties. She paid a $3 million civil penalty to the Securities and Exchange Commission in May and was assessed a $17 million civil penalty by the Office of the Comptroller of the Currency in March for her role in “systemic sales practices misconduct.” Furthermore, Wells Fargo clawed back approximately $65 million in compensation after the scandal.
The scandal led to numerous leadership shakeups at Wells Fargo and resulted in more than $5 billion in fines and legal settlements for the bank. The repercussions also included thousands of layoffs as the bank sought to rectify its sales practices.
Tolstedt’s case has been closely watched as a bellwether for whether prosecutors have the appetite and ability to jail wrongdoers in the upper echelons of big banks. Her plea agreement with the Department of Justice had called for a prison sentence of up to 16 months, which was at the high end of the 10-16 month range calculated under federal sentencing guidelines.
The case is US v. Tolstedt, 23-cr-115, US District Court, Central District of California (Los Angeles).
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