September 12th, 2016.

Carrie Tolstedt, the high flying executive who oversaw the massive 2016 Wells Fargo cross selling scandal, is a heavy donor to politicians overseeing the nations banking system.

On September 8, Wells Fargo and Company was fined $185 million due to its practice of “cross selling” or creating fake bank and credit card accounts without the consent or knowledge of customers. Court filings and Wells Fargo strategy documents indicate this practice was a fundamental part of Well’s strategy:

Source: Wells Fargo Vision and Values

The company’s cross selling strategy lead to the creation of at least 1,534,280 unauthorized accounts, 85,000 of which generated $2 million in fees. The practice of cross-selling also resulted in the creation of 565,443 possibly unauthorized credit cards. Roughly 14,000 of these accounts incurred about $403,450 in fees. These disturbing practices took place under Tolstedt’s leadership, who headed the community banking division of Wells Fargo for nine years. Despite the scandal, Tolstedt is set to receive approximately $124 million in stock, stock options and restricted stock, according to company filings.

Tolstedt’s Political Donations

While leading Well’s cross-selling efforts, Tolstedt was actively donating to politicians who oversaw her industry. Between 1999 and 2015 Federal Election Commission records show that Tolstedt donated a total of $32,825 to political action committees or to candidates who oversaw the nation’s financial systems.

Tolsted’s donations included important senators like Democratic Presidential Candidate Hillary Clinton, Montana Senator Jon Tester, New York Senator Charles Schumer and Virginia Senator Mark Warner – most of whom were current or former members of the Senate Committee on Banking, Housing and Urban Affairs. Tolsted’s donation recipients were also the election campaigns of Republican representative Kevin McCarthy, of California’s 23rd District, as well as former Montana Senator Max Bachus, North Carolina’s Kay Hagan and former senator Ben Nelson.

Tolstedt provided substantial funding to the Wells Fargo & Co. Employees Good Government Federal Fund II Political Action Committee and the Wells Fargo & Co Employee Company PAC. Both of these funds’ objective was to aggregate the donations of Well Fargo employees to provide funding to political candidates. Tolstedt provided monies to theWell Fargo & Company Impact Fund, which was closed in San Francisco, California in 2015, suggesting it was implemented to influence California Legislators (1).

Making political donations does not guarantee a quid pro quid. However, donations do dramatically increase the likelihood of gaining access to the politician through personal meetings or social invitations.

In addition to aggressively donating to politicians in the financial services industry, past news reports indicate that Tolstedt also took time and care to cultivate relationships with her superiors in banking Industry. In October of 2010 the American Banker reported:

She (Tolstedt) met CEO John Stumpf more than two decades ago, when she was working in Omaha for then-Norwest Corp. handling workouts in agricultural communities during the farm crisis. Stumpf, then running his own workout book for the company in the Twin Cities, was dispatched to check up on her operation and came away reassured. “Carrie can talk at levels of detail and nuance that no one else in our industry can,” Stumpf says. After Norwest acquired Wells (and took its name) in 1998, Tolstedt was given the responsibility of showing then-Wells executive Terri Dial around. The few days the two women spent talking about the business led to another responsibility for Tolstedt- a regional president position in California-that set her on a path into Wells’ senior management.

Source: American Banker.

Tolstedt’s actions appear to have resulted in Wells Fargo being penalized for widespread violations of sections §§ 1031 and 1036(a)(1)(B) of the 2010 Consumer Financial Protection Act and violations of the U.S. code section 12 § 5531 and Code § 5536 which prohibit deceptive practices and obstruction of justice (click here for the consent decree). However, the extent of Tolstedt’s payments to prominent members of Congress suggests that Wells Fargo and the Senate had a problematically close relationship. This disincentive to investigate implied in this close relationship may have been partially responsible for Congress’s failure to prevent the sustained, aggressive and widespread nature of Wells Fargo’s fraud.

How do you think this scandal will affect Wells Fargo?