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A federal grand jury in San Francisco has indicted two former bank executives of the now-defunct United Commercial Bank for misrepresenting loan losses to federal agencies as the bank took money from taxpayers through the Troubled Asset Relief Program (TARP).
[IMAGE]Specifically, the charges include conspiracy to commit securities fraud, falsifying corporate books and records, and lying to auditors.
United Commercial Bank was headquartered in San Francisco, with branch offices throughout the United States as well as in China and Taiwan. Its holding company, UCBH Holdings, Inc., was publicly traded on NASDAQ.
The defendants charged are Ebrahim Shabudin, who served as United Commercial Bank's chief credit officer and chief operating officer from September 2008 through April 2009, and Thomas Yu, the bank's manager of credit risk and portfolio management from June 2008 through June 2009.
The indictment, which was unsealed Tuesday, charges that between 2004 and 2007, the bank's loan portfolio increased from approximately $4.4 billion to more than $8 billion.
By September 2008, the bank's loan portfolio faced growing losses. In November 2008, the bank received approximately $298 million from TARP.
The indictment alleges that beginning in September 2008, Shabudin and Yu, along with others, used fraudulent accounting maneuvers and techniques to hide the bank's true financial condition from the U.S. Department of Treasury, investors, depositors, regulators, and the bank's independent auditor.
[COLUMN_BREAK]""Shabudin and Yu are the first senior executives of a TARP bank charged in connection with a scheme to defraud investors, which included the Treasury, and by extension the American taxpayer, Christy L. Romero, acting Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said in a statement.
Romero continued, ""The bank failed and all of the $298 million in TARP funds are lost. SIGTARP will tirelessly work with its law enforcement partners to root out fraud at TARP banks.""
After the bank failed in November 2009, the FDIC became the receiver and, to date, has paid out approximately $397 million as a result of the seizure. The indictment estimates total losses to the FDIC will be approximately $2.5 billion, and further alleges that none of the TARP funds have been repaid. United Commercial Bank was the first TARP recipient bank to fail.
Shabudin was arrested Saturday. Yu surrendered in court Tuesday morning. Both defendants made their initial appearances in federal court in San Francisco Tuesday and were released on $500,000 secured bonds. The defendants' next scheduled appearance is on October 20, 2011.
The Securities and Exchange Commission (SEC) filed separate civil charges Tuesday accusing Shabudin, Yu, and United Commercial Bank's former CEO Thomas Wu of misleading investors about the bank's mounting loan losses.
The SEC's complaint alleges that the three executives deliberately concealed losses from auditors, causing the bank's public holding company UCBH Holdings Inc. to understate 2008 operating losses by at least $65 million, or approximately 50 percent.
The SEC says Wu ""was considered a rising star in the banking industry,"" sitting at the helm of the first U.S. bank to acquire a bank in the People's Republic of China, but by 2009, Wu found himself at the helm of a bank on the brink of failure.
""Today's charges reflect an all too familiar pattern â€" corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces. But accountability for these executives begins today,"" said Robert Khuzami, director of the SEC's enforcement division.
