A former top Wells Fargo executive avoided prison time for her role in the bank’s fictitious accounts scandal after a federal judge on Friday instead sentenced her to six months of house arrest and three years of probation. She was also ordered to pay a $100,000 fine and complete 120 hours of community service.
Former executive Carrie L. Tolstedt, head of retail banking at Wells Fargo, was the only senior executive at the bank to be criminally charged for her misconduct. She pleaded guilty this year to obstructing a bank exam.
Prosecutors had sought a 12-month prison sentence, saying in a court filing that the 63-year-old Tolstedt’s detention would be a “general deterrent to other executives who might be tempted to evade the truth.”
Ms. Tolstedt’s lawyers had pushed for probation, citing similar rulings in other cases and citing Ms. Tolstedt’s “lifelong community service.” Both the prosecution and defense also cited Ms. Tolstedt’s health problems, details of which had been redacted from public versions of court records, as a factor favoring leniency.
Ms. Tolstedt ran Wells Fargo’s retail branches during the years when the bank opened potentially millions of fraudulent bank accounts, a scandal that became public in 2016 and toppled two successive chief executives.
Although relatively few customers were directly harmed by the bank’s actions – the damage fell hardest on employees, who faced intense pressure to break the law or risk being fired – the revelation drew the attention of regulators Wells and led to the discovery of further misconduct. The bank has paid billions of dollars in fines, including a $3.7 billion penalty imposed last year, for, among other things, illegally repossessing some borrowers’ cars and homes and charging overdraft fees even when customers had enough money to cover their purchases.
Ms Tolstedt had always denied any wrongdoing in the matter of the fictitious accounts. She had resigned from the bank shortly before its actions became public and was later fired for cause.
Ms. Tolstedt “takes full responsibility for her offense and recognizes that it was wrong,” her lawyers wrote in a filing before sentencing. In March, she agreed to pay $17 million to settle civil lawsuits brought against her by the Office of the Comptroller of the Currency.
Ms. Tolstedt was sentenced by Judge Josephine Staton in Los Angeles. A spokesman for the U.S. Attorney for the Central District of California declined to comment on the ruling. Ms. Tolstedt’s lawyer also declined to comment.
Wells Fargo is still reeling from the fallout from its series of scandals. Since 2018, the company has been subject to a draconian asset cap imposed by the Federal Reserve, severely restricting its growth. That restriction “is a reflection of the fact that we have more work to do,” Charles Scharf, chief executive of the San Francisco-based bank, told analysts on a call in July. He added: “It is critical that we continue on our path to completing this work.”