Tolstedt is the first senior Wells Fargo executive to be criminally charged for the bank’s actions since the fake accounts scandal broke in 2011. The charge carries a maximum sentence of five years, but agreeing to enter a guilty plea could mean Tolstedt receives a 16-month sentence.

The Justice Department has requested a hearing on April 7, and Tolstedt is expected to appear in court in Los Angeles in the next few weeks.

The former executive has also reached a settlement with the Office of the Comptroller of the Currency (OCC) in which she has agreed to a ban from working in the banking industry, and to pay a $17m fine for her role in “systemic sales practice misconduct”, something the OCC says she was “significantly responsible” for.

Aggressive tactics

The bank’s sales culture and cross-selling strategy had first come under scrutiny in 2011, when the Wall Street Journal raised questions about the selling of multiple products to customers. Two years later, the Los Angeles Times published an article detailing the intense pressure imposed to deliver on very aggressive and sometimes mathematically impossible targets.

Further investigations revealed as many as 1.5 million checking and saving accounts were opened without customer consent. In 2016, despite claiming to have reformed its practices, the bank was fined $185m over the creation of unauthorized deposit and credit card accounts.

Tolstedt was alleged to have been responsible for applying pressure on middle managers to improve the ‘cross-sell ratio’. She consistently denied any wrongdoing, and was praised by then-CEO John Stumpf when she retired in 2016. But the charge she has now admitted to stems from a memo she helped prepare in 2015 in which she concealed details about the scale of the bank’s internal problems.

Failure to disclose

The OCC says that the memo failed to disclose the number of employees whose contracts were terminated or resigned in connection with the deployment of aggressive sales tactics, despite Tolstedt having known about so-called ‘gaming’ by sales staff for almost a decade.

Tolstedt was retroactively fired and forced to forfeit earnings in 2017.

“The justice system and regulators rely on corporations and their executives to fully cooperate during investigations into potential wrongdoing. But, in this case, Ms. Tolstedt took steps to cover up misconduct at Wells Fargo,” said Acting United States Attorney Joseph T McNally.

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.”