There are always consequences for committing fraud, some sooner, some later. The banking industry has clearly had its problems this month with SVB and other players, but it’s not quite time to forget what happened at Wells Fargo. As a business ethics keynote speaker, business ethics consultant and author, I am not at all surprised that justice has finally caught up with Carrie Tolstedt. Nor will I be surprised when consequences catchup with other “C-Suite” players.
Former Head of Retail Banking
Carrie Tolstedt made history with her climb at Wells Fargo but now, in a bad way, she faces a civil penalty of $17 million for her role in obstructing justice, bank examiners, and defrauding customers by ordering subordinates to create phony accounts.
According to a report from Reuters (March 28, 2023), “The development marks a rare instance of a senior bank executive facing prison time as a result of their job.”
In making a guilty plea agreement for her role in obstruction in regard to committing fraud, she faces up to 16-months in federal prison. The Office of the Comptroller of the Currency, “said Tolstedt was ‘significantly responsible’ for the widespread sales abuses at the bank, where potentially millions of accounts were opened without customer approval.”
An entire unethical infrastructure was set in place at Wells Fargo in 2016, and basically employees were told to comply with the directives to open (and sometimes charge for) fake accounts or get fired.
Said the Reuters article:
“Between 2002 and 2016 (she forced employees) to meet unrealistic sales goals, which led them to open fake accounts for customers.”
This charge belatedly comes on the heels of the Justice Department forcing a $3 billion fine on the bank in February 2020. Carrie Tolstedt is also barred from the banking industry.
As a business ethics keynote speaker, business ethics consultant and author, I realize being barred from an industry may seem as though it is not a big deal, however it strikes to the very heart of reputation. She will be unwelcomed in circles where she was once embraced. It is a surprisingly heavy load.
Not alone
It is important to share a significant comment here:
“Finally, decades after the largest fraud in American history, a banker is going to jail,” said Bartlett Naylor, a financial policy advocate with Public Citizen in Washington. “But Tolstedt did not operate alone; she had bosses. They must face real justice as well.”
Herein is the heart of the problem. The banking industry has always had its own inner code and closed circle. Tolstedt did have bosses and so far, they are not seeing jail cells. That Wells Fargo willingly pain $3 billion in fines is disturbing; not the amount, but as an agreement to settle, smacks of the fact that some simply ran as far and as fast away from further prosecution as possible. Bartlett Naylor is correct in saying that they must face real justice, but they probably won’t.
The banking industry has long had a history of unethical behaviors and it encompasses everything from discrimination in hiring to unwritten lending policies that have “red-lined” and destroyed neighborhoods. In an industry that seemingly celebrates transparency and good ethics, it is not.
The solution here is ethical and not legal. It is a matter of accountability, ethical training and follow-up however, it must take place from the top-down. It makes no sense to teach a new bank-teller about ethics, if the CEO and other executives are at the same time forcing retail people to open new accounts that customers never asked to open. It is an acknowledgement of fraud.
Carrie Tolstedt is taking the blame for executives above her but much more, she is reflecting an entire industry that has all too often escaped penalty and judgment.
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