Saturday, October 22, 2011
The indictment returned against former United Commercial Bank senior officers Ebrahim Shabudin and Thomas Yu on September 15, 2011, was unsealed on October 11 in the Northern District of California. This is one of the very few significant bank/securities fraud cases, related to the financial meltdown, that has been brought by Attorney General Holder's Department of Justice. Here is a copy of the Ebrahim Shabudin-Thomas Yu Indictment. A virtually identical criminal information was brought against former UCB senior officer Lauren Tran on May 24, 2011. It was not unsealed until October 13, but Tran pled guilty on June 15. The plea agreement is currently unavailable on PACER, despite the Court's order unsealing the record. The essence of the various charges is that senior bank officials systematically deceived the market and bank regulators about the bank's condition, through false entries and statements.
The invaluable William K. Black has written an outstanding article in Credit Writedowns about the pathetic and long-running failure of federal banking regulators to take any meaningful action against UCB. According to Black:
"In 2002, a court found that UCB’s senior managers had engaged in fraud to hide losses on a large loan for the purpose of fraudulently inducing another bank to bear the losses. It found the senior officers’ conduct so outrageous that it awarded substantial punitive damages. The FDIC, the SEC, and the Department of Justice did nothing in response to the fraud."
The bank continued to grow at an alarming rate, continued to receive high regulatory grades, and even obtained hundreds of millions in TARP funds, despite its sordid history and the credible warnings of a concerned whistleblower.
This will be a case to follow.