Carrie Tolstedt, former head of Wells Fargo’s community banking division, was sentenced to three years’ probation, including six months’ home confinement, last week for her role in the bank’s 2016 scandal in which more than two million credit cards and bank accounts were created for existing customers without their knowledge.

The fake accounts were then charged various fees.

The malpractice was the result of the banks’ pressure on workers to meet quotas to boost business.

The scandal led to the firing of CEO John Stumpf, who regulators then banned from the banking business for life.

However, no one was jailed and Tolstedt was the only employee to be brought up on criminal charges.

Tolstedt pled guilty to one charge of obstructing regulators’ investigation of the mess. Prosecutors had argued that Tolstedt be sentenced to prison for 12 months.

She had boasted to investors about the number of open accounts, knowing the information was false, regulators charged. 

Tolstedt also signed disclosure reports attesting to the accuracy of the figures “when she knew, or was reckless in not knowing” that the information “was materially false and misleading,” the U.S. Securities and Exchange Commission (SEC) said in its complaint against her.

In addition to serving probation time, she paid a $17-million fine to the Office of the Comptroller of the Currency and $3 million in penalties to the SEC.

When Tolstedt left Wells Fargo in 2016, she received a $125-million retirement package. The bank has pulled back about $67 million of that.

Even after the fake accounts scandal, Wells Fargo has continued to play fast and loose.

It has settled allegations that it illegally repossessed military members’ cars. It also was alleged to have charged car owners for needless insurance and suspended homeowners’ mortgage payments during the COVID War without their knowledge or approval. No individuals faced fraud or other charges.

In 2018, the U.S. Federal Reserve capped Wells Fargo’s assets, forcing it to not improve its balance sheet until it addressed regulatory deficiencies that led to past scandals.

TRENDPOST: Banks are “too big to fail”; apparently bankers are “too big to jail.” Jail time is almost unheard of for officials in high finance who commit crimes. 

Despite countless instances of fraud and misrepresentation in the run-up to the Great Recession, only one Wall Streeter went to prison for crimes that led to the greatest financial disaster in 75 years: Credit Suisse executive Kareem Serageldin was convicted of misrepresenting bond prices to hide losses. 

In December 2021, the SEC fined the brokerage arm of JPMorgan Chase $125 million, the largest fine ever to that date, for violating SEC rules requiring brokerages to document communications and make such records available to regulators. No one did jail time.

In January 2022, Germany’s bank regulators fined Deutsche Bank the equivalent of $2.5 billion for failing to adopt “effective preventive systems, controls, and policies” that would keep employees from colluding with counterparts at other institutions to set interest rates artificially, the Federal Financial Supervisory Authority alleged.

The bank ignored rules that grew out of a 2015 scandal in which several banks conspired to manipulate the London Interbank Offered Rate (LIBOR), an interest-rate average calculated from estimates pooled by various banks of what each bank would be charged if it borrowed from other banks. 

Several employees were fired; none were tried as criminals.

This summer, Bank of America was socked with a $250-million fine after it was found to have opened credit card accounts in customers’ names without their permission and for double-charging some fees.

To open the accounts, the bank used credit reports on customers that it had obtained illegally, the Consumer Financial Protection Bureau charged. Employees had been secretly opening these accounts since at least 2012 to make productivity goals and earn rewards, the bureau said.

No bank employees faced criminal charges or trials.

Officials of the U.S. Federal Reserve also have committed what seems to be insider trading with impunity.

In 2020, two U.S. Federal Reserve officials traded stocks and other securities while the central bank was shoring up financial markets with bond purchases, changes to interest rates, and other aids.

The transactions, made by Robert Kaplan, president of the Federal Reserve Bank of Dallas, and Eric Rosengren, president of the Boston Fed, complied with federal regulations, The New York Times reported, but raised questions about the officials’ judgment and the Fed’s ethical standards, which seem to allow the possibility or appearance that senior Fed officers could profit from inside information.

Soon after their “ethical lapses” were revealed, the two men resigned. After an internal investigation, no charges were brought. For the full story, see “Bankster Bandits Get Richer Playing the Inside Track” (14 Sep 2021) and “Fed’s Insider Trading Bandits Get Free Ride” (20 Sep 2022).

We have documented the long criminal trail of major banks in a series of articles including:

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