In 2020, Wells Fargo Bank bought its way out of criminal proceedings and associated civil actions by regulators for a total of USD3,000 million. The bank, over a period of 14 years starting in 2002, developed a practice of "pressuring employees to meet unrealistic sales goals that led thousands of employees to provide millions of accounts or products to customers under false pretences or without consent, often by creating false records or misusing customers’ identities...Wells Fargo admitted that it collected millions of dollars in fees and interest to which the Company was not entitled, harmed the credit ratings of certain customers and unlawfully misused customers’ sensitive personal information, including customers’ means of identification."
At that time, the DoJ said "The criminal investigation into false bank records and identity theft is being resolved with a deferred prosecution agreement in which Wells Fargo will not be prosecuted during the three-year term of the agreement if it abides by certain conditions, including continuing to cooperate with further government investigations. " That three years expired in February this year. So, all done and dusted, right?
Wrong.
Yes, the bank seems to be relieved of further liability, from what we can tell, but now the DOJ has turned its attention to at least one of the bank's staff, Carrie Tolstedt. Interestingly, she has not been charged with the same conduct as the bank, i.e. creating false accounts, making false charges and so on. She's been charged that when the Office of the Comptroller of the Currency was investigating, she "took steps to cover up misconduct at Wells Fargo."
Mark Bialek, Inspector General for the Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau said "The plea agreement filed today sends a clear message that bank executives who commit fraud and deliberately deceive regulators will be brought to justice for their actions."
Tolstedt was a big boss: From approximately 2007 to September 2016, she was Wells Fargo’s senior executive vice president of community banking and head of the Community Bank which operated Well Fargo’s consumer and small business retail banking business. The Community Bank managed many of the products that Wells Fargo sold to individual customers and small businesses, including current and savings accounts, certificates of deposit, debit cards, bill paying and other products.
The problems were systemic and it was established that Tolstedt was aware of several of them as early as 2004 but, aside from occasional dismissals for so-called "gaming" nothing was done to curb the practices. Then when investigations started, she worked to reduce the effectiveness.
According to the DoJ "In May 2015, Tolstedt participated in the preparation of a memorandum, which she knew would be provided to the OCC in connection with its examination of sales practice issues at Wells Fargo. To minimize the scope of the sales practices misconduct within the Community Bank, Tolstedt corruptly obstructed the OCC’s examination by failing to disclose statistics on the number of employees who were terminated or resigned pending investigation for sales practices misconduct. She also failed to disclose that the Community Bank proactively investigated only a very small percentage of employees who engaged in activity flagged as potential sales practices misconduct."
Perhaps "dishonestly" would be a better word than "corruptly."
In the consent order relating to the Comptroller's civil proceedings, Tolstedt agreed to be banned from working in the banking industry and to pay a civil penalty of USD17 million.
Further reading: https://www.justice.gov/opa/pr/wells-fargo-agrees-pay-3-billion-resolve…
https://www.justice.gov/usao-cdca/pr/former-wells-fargo-executive-agree…
https://www.occ.gov/news-issuances/news-releases/2023/nr-occ-2023-24.ht…
