SAN FRANCISCO (CN) - The CEO of United Commercial Bank lied about the bank's accelerating losses on real estate before the bank failed in 2009, costing the FDIC $2.5 billion, the SEC says.
CEO Thomas S. Wu "was a rising star in the banking industry" when the house of cards collapsed, the SEC says in its 26-page federal complaint. He was CEO of the San Francisco-based United Commercial Bank and its public traded corporate parent, UCBH, for 10 years, including during its IPO in 1998. At the end of 2008 the bank reported total assets of $13 billion and loan assets of more than $8 billion.
But as the real estate market melted down, Wu and his co-defendants "took steps to delay disclosure of the full extent of the losses the bank faced," according to the complaint.
The SEC says UCBH underreported its $134 million loss for 2008 by at least $65 million in its March 2009 Form 10-K annual report. "These materially misstated financial results failed to apprise the investing public of the true severity of the loan losses faced by the bank, thereby understating a critical measure of the health of the financial institution. The mounting loan losses would later lead to the bank's failure," the complaint states.
Regulators closed the bank in November 2009. It was the ninth-largest bank to fail during the financial crisis, "and its failure has cost the FDIC's insurance fund $2.5 billion," according to the complaint.
The SEC sued Wu, 53, of Hillsborough; COO Ebrahim Shabudin, 63, of Moraga; first vice president Thomas Yu, 48, of San Ramon; and CFO Craig On, 59, or Berkeley.
All four refused to testify in the SEC investigation.
The SEC seeks injunctions and civil penalties for securities violations.
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