In a plea agreement filed March 15 in U.S. District Court, Tolstedt pled guilty to one count of obstruction of a bank examination and is expected to make her initial court appearance in the coming weeks, with a hearing requested for April 7.
The Office of the Comptroller of the Currency (OCC) separately reached a resolution with Tolstedt, in which she agreed to pay $17 million penalty and agreed to a ban from working in the banking industry.
Case Facts
From approximately 2007 to September 2016, Tolstedt was Wells Fargo’s senior executive vice president of community banking and was 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 checking and savings accounts, CDs, debit cards, bill pay, and other products.
In February 2020, Wells Fargo agreed to a $3 billion penalty to settle criminal and civil charges for opening millions of fraudulent accounts and other financial products—such as credit cards and bill pay products—from 2002 through 20016 that consumers did not authorize. 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.”
According to the plea agreement, Tolstedt became aware of sales practices misconduct within the Community Bank around 2004 and further became aware of corporate investigations and an increasing number of employee terminations resulting from these practices around 2006. She also learned, “the misconduct was linked in part to sales goals within the Community Bank, and that termination numbers likely underestimated the scope of the problem,” according to the DoJ.
Although steps had purportedly been taken to proactively identify sales misconduct, the measures used by the Community Bank left 99.99 percent of “red flag” sales practices unexamined. In May 2015, while helping to prepare a memorandum to the OCC regarding the bank’s sales practices, Tolstedt “corruptly obstructed the OCC’s examination” by failing to disclose the true number of employee terminations or resignations, or that only a small number of employees were actually investigated.
The statutory maximum sentence for obstruction of a bank examination is five years in federal prison. Tolstedt has entered into a plea agreement that calls for up to 16 months in prison. As a binding plea agreement, the court must accept or reject all aspects of it. Should the court reject the plea agreement, any party may withdraw from it. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.