Ex-bank Exec Settles SEC Suit

March 30, 2012 /

The Securities and Exchange Commission charged a former bank employee with misleading the bank’s independent auditors regarding risks the bank faced on certain outstanding loans.

The SEC alleges that John Cinderey, a former executive vice president at San Francisco-based United Commercial Bank, acting at the direction of his superiors, misled the outside auditors evaluating financial statements of the bank and its public holding company, UCBH Holdings, Inc.

In a complaint filed in federal court in San Francisco, the SEC alleges that during the financial crisis in 2008 and 2009, Cinderey altered memoranda prepared for the independent auditors. The complaint also alleges that Cinderey circumvented accounting controls and policies that required the bank to accurately assess the risks associated with loans, and alleges that delays in accurately evaluating the risks in some cases could affect the bank’s loan loss reserves and interest income.

Cinderey agreed to settle the SEC charges without admitting or denying the allegations. He will be permanently enjoined from violating provisions of the federal securities laws regarding record-keeping, misleading outside auditors, and internal controls. Cinderey will not pay a civil penalty in this case in part based on a $40,000 civil penalty he paid in an administrative action brought by the Federal Deposit Insurance Corporation (FDIC).

The terms of the settlement also reflect credit given to Cinderey by the Commission for his substantial assistance in the investigation and the fact that he has entered into an cooperation agreement to assist in an ongoing related enforcement action.

The Commission has previously charged senior executives at the bank and UCBH with committing securities fraud by making false and misleading statements to investors and UCBH’s independent auditors.

In a complaint filed in U.S. District Court in San Francisco on October 11, 2011, Case No. 11-CV-04998, the Commission alleges that former CEO Thomas Wu, former Chief Operating Officer Ebrahim Shabudin, and former executive vice president Thomas Yu deliberately delayed the proper recording of loan losses as the company prepared its 2008 financial statements. SEC Litigation Release No. 22121.

 

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