SEC charges former leaders of United Commercial Bank with hiding losses
Former executives of the now defunct United Commercial Bank face civil charges filed by the Securities and Exchange Commission for covering up losses on real estate loans. The SEC claims the banks' management deliberately misled investors in the wake of the 2008 financial crisis. The federal regulator said Thomas Wu, former chief executive of United Commercial Bank, was once a rising star in the banking industry. But that changed when Ebrahim Shabudin, while United Commercial's chief operating officer, understated the bank's 2008 operating losses by $65 million. The SEC claims the bank's leadership knew several large real estate loans were deteriorating but hid the details from investors and the public. The bank failed a soon thereafter, costing the Federal Deposit Insurance Corp.'s insurance fund $2.5 billion. "Today's charges reflect an all-too-familiar pattern — 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," said Robert Khuzami, director of the SEC division of enforcement. "But accountability for these executives begins today." United Commercial Bank, and its parent company UCBH Holdings Inc., grew rapidly in the past decade after an initial public offering in 1998. It was the first U.S. bank to acquire a bank in China, the SEC said in a statement. A federal grand jury in California charged Wu and Shabudin with conspiracy to commit securities fraud, securities fraud, falsifying corporate books and records, and lying to auditors, according to the FBI, for delaying the recording of loan losses and making misleading statements to investors. Craig On, the bank's former chief financial officer, was charged with negligently misleading auditors and agreed to settle with the SEC by paying a $150,000 penalty. Write to Kerri Panchuk.