Former Wells Fargo Senior Executive Carrie Tolstedt Agrees to Settle SEC Fraud Charges for Misleading Investors About Abusive Sales Practices to Inflate a Key Performance Metric

The U.S. Securities and Exchange Commission (SEC) disclosed today that it has reached a settlement with Carrie L. Tolstedt, the former head of Wells Fargo & Co.’s Community Bank. Tolstedt has consented to pay a penalty of $3 million, related to charges from 2020 accusing her of misleading investors about the Community Bank’s performance, a primary business segment of Wells Fargo. This follows the SEC’s earlier settlements regarding similar charges against Wells Fargo itself and its former CEO and Chairman, John Stumpf.

Per the SEC’s complaint against Tolstedt, she is accused of endorsing and publicly portraying Wells Fargo’s “cross-sell metric” as a reliable gauge of the firm’s financial prosperity from mid-2014 to mid-2016. However, this measure was allegedly inflated due to accounts and services that were unauthorized, redundant, or unused. It is further claimed that Tolstedt knew that the cross-sell metric did not accurately reflect accounts or products that customers actually needed or used, as she was cognizant of malpractices at the Community Bank, including bankers promoting unnecessary or unwanted products to customers and the unauthorized opening of accounts. The complaint also alleges that Tolstedt made deceptive public remarks to investors at Wells Fargo’s investor conferences in 2014 and 2016, and she signed sub-certifications regarding the accuracy of Wells Fargo’s public disclosures, despite knowing or being recklessly ignorant of the fact that the statements about the bank’s cross-sell metric were substantially false and misleading.

Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office, stated, “Companies don’t operate in a vacuum. When the circumstances justify it, we will hold top executives responsible for actions that breach securities laws.”

Without confirming or denying the SEC’s claims, Tolstedt agreed to a final judgment that permanently restrains her from infringing or assisting in infringements of the anti-fraud and other provisions of federal securities laws. This judgment also imposes a permanent officer-and-director ban. In addition to the $3 million civil penalty, Tolstedt has agreed to pay disgorgement of $1,459,076 plus prejudgment interest of $447,874. This sum, along with the $500 million paid by Wells Fargo and the $2.5 million penalty paid by Stumpf in earlier settlements, will be pooled by the SEC and distributed to the investors who were impacted. The settlement awaits court approval.

The SEC lodged the complaint against Tolstedt in the U.S. District Court for the Northern District of California. The litigation was managed by Susan LaMarca, Erin Wilk, Victor Hong, John Roscigno, and Horace Austin from the SEC’s San Francisco Regional Office, and was supervised by Jason H. Lee and Ms. Winkler.