The former president, chief lending officer, and CEO of a Maryland bank that failed in 2014 is now banned from working in the banking industry after the Federal Reserve accused him of breaching his fiduciary duties to the bank, issuing loans to himself, and other malfeasance.
The Federal Reserve announced Friday that it is prohibiting Jacob Goldstein, who ran NBRS Financial until 2012, from the banking business.
According to the Fed, Goldstein engaged in “unsafe and unsound practices, violations of law, and breached his fiduciary duties” to the bank, by taking part in “self-dealing transactions involving bank loans and withholding material information from the NBRS board of directors.”
The Fed levied these accusations against Goldstein back in February and gave Goldstein ample opportunity to respond to the allegations, but Goldstein did not respond to repeated attempts to contact him.
Therefore, the prohibition order against Goldstein was issued by default.
According to the Fed, from at least 2008 through his resignation in 2012, Goldstein used his position as bank president, CEO, and chairman of the board to engage in “improper” business practices for his own benefit.
The Fed accused Goldstein of using his position to take out a $250,000 loan from the bank under questionable circumstances. According to the Fed, in May 2010, the bank approved a $250,000 loan to one of its board member’s sons. The loan was supposedly going to be used for real estate investment.
But, the Fed claimed that Goldstein had asked the board member’s son to take the loan out on his behalf with the funds actually going to Goldstein’s “personal use.”
Goldstein allegedly hid the true purpose of the loan from the board and even voted to approve the loan.
Additionally, in April 2008, NBRS made a $100,000 unsecured loan to an unidentified company, to finance costs related to a development project, but Goldstein did not disclose that he owned a one-sixth interest in the company, a special purpose real estate entity.
Again, as with the previous loan, Goldstein voted to approve the loan and did not reveal his financial interest in the matter to his fellow board members.
Goldstein resigned from his positions at the bank in 2012, but the bank failed in 2014 due to its “poor financial condition,” according to the Fed.
“The bank failed, in part, because of Goldstein’s dominant influence over the bank’s operations which limited the institution’s ability to overcome its deteriorating financial condition and Goldstein’s engaging in improper business practices for his own benefit,” the Fed said in a filing.
According to the Fed, Goldstein’s prohibition from working in the banking industry will continue into perpetuity until (or if) the Fed decides to lift the ban.