Tolstedt pleaded guilty to obstructing a government examination into widespread sales practices misconduct, which included opening millions of unauthorized accounts and other products, the DOJ said.
Under terms of the agreement, Tolstedt faces up to 16 months in prison and will pay a $17 million civil penalty. She also agreed to a ban from working in the banking industry.
The statutory maximum sentence for obstruction of a bank examination is five years in federal prison.
She expected to make her initial court appearance in Los Angeles in the coming weeks.
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“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,” Acting United States Attorney Joseph T. McNally said in a statement.
“Obstructing an investigation compromises the mission of those seeking the truth, and we will hold accountable any individual who attempts to conceal wrongdoing.”
Wells Fargo in 2020 acknowledged the widespread misconduct and agreed to pay a $3 billion penalty.
“We are proud to work with our partner agencies to help bring justice to the many people who were harmed by the unscrupulous sales practices of Wells Fargo,” Federal Housing Finance Agency Inspector General Brian Tomney said in a statement.
“The results of this case should be a clear signal that FHFA-OIG and its partner agencies will hold accountable those who seek to put profits ahead of legal and fair banking practices.”
Tolstedt served as Wells Fargo’s senior executive vice president of community banking from 2007 to September 2016. She led the Community Bank, which operated Well Fargo’s consumer and small business retail banking business.
Wells Fargo previously admitted that from 2002 to 2016 its excessive sales goals led Community Bank employees to open millions of unauthorized accounts and other financial products deemed fraudulent.
The bank collected millions of dollars in fees and interest to which it was not entitled, harmed customers’ credit ratings, and unlawfully misused customers’ sensitive personal information, the DOJ said.
Internally Wells Fargo called these practices “gaming.”
Gaming strategies included opening accounts using existing customers’ identities without their permission, and included forging customer signatures to open accounts without authorization, creating PINs to activate unauthorized debit cards, and moving money from millions of customer accounts to unauthorized accounts in a practice known internally as “simulated funding.”
Gaming also included opening credit cards and bill pay products without authorization, altering customers’ contact information to prevent customers from learning of unauthorized accounts and to prevent Wells Fargo employees from reaching customers to conduct customer satisfaction surveys, and encouraging customers to open accounts they neither wanted nor needed.
According to her plea agreement, Tolstedt by 2004 was already aware of sales practices misconduct within the Community Bank and that employees were terminated each year for gaming.
“This plea agreement demonstrates the determination and cooperation of Postal Inspectors and our federal law enforcement partners. Postal Inspectors are committed to investigating anyone holding a position of trust in the financial system that would engage in a fraud to deceive their customers,” said Rafael Nuñez, Inspector in Charge of the United States Postal Inspection Service, San Francisco Division.
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