A former executive with the United Commercial Bank — the first institution rescued during the bailout of 2008/2009 to subsequently fail — was sentenced to eight years in prison for covering up the lender’s dire financial situation.
The Washington Post reported Wednesday (Sept. 2) that former Chief Credit Officer Ebrahim Shabudin falsified records in an effort to hide losses tied to loans at the San Francisco-based bank, misleading investors and auditors. That falsification took place even while the company garnered, and burned through, $300 million in cash from the Troubled Asset Relief Program, commonly known as TARP.
The bank, which at one point handled $11 billion in assets, became the ninth-largest institution to fail in the wake of the financial crisis, and the costs to the fund that insures the monies deposited by consumers ran to more than $675 million. In its heyday the bank ran more than 50 branches across the United States, China and Taiwan. High-risk loans brought the total portfolio to a heady $8 billion by 2007, double the amount seen just three years before — and it was the risky loans that unraveled. Shabudin and others — including CEO Thomas Shiu-Kit Wu and CFO Craig S. On, who were both convicted last year — failed to downgrade the loans in a timely manner, understating the bank’s losses by about $65 million and disseminating false information to investors.
The federal jury convicted Shabudin of seven counts of conspiracy and corporate fraud after a six-week trial.
“Shabudin had every opportunity to do the right thing, but he was motivated instead to preserve the bank’s reputation at all costs, even if it meant committing a crime,” said Christy Goldsmith Romero, special inspector general for TARP, in a statement to the Post. “He was essentially gambling with taxpayers’ bailout dollars, and it was taxpayers who ultimately lost.”
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