Saturday, October 22, 2011

The UCB Indictment

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.

(wisenberg)

October 22, 2011 in Fraud | Permalink | Comments (0) | TrackBack (0)

Friday, October 21, 2011

Yesterday in Fraud

In an otherwise unremarkable bank and mail fraud affirmance, the Fifth Circuit reminds us that losses cannot be included as relevant conduct unless they are bottomed on criminal and/or fraudulent behavior. The appellant in U.S. v. Bernegger (loss must be criminally derived to count as relevant conduct), obtained two grants of $250K each from the State of Mississippi, which secured a first lien on the underlying collateral. Appellant later pledged the same collateral to other entities, but there was literally no evidence indicating that the original grants were procured through fraud. Nevertheless, the probation officer included the grants in the PSR's loss calculation and the trial court accepted the figure. The Fifth Circut also reiterates that "bare assertions" in a PSR are not, standing alone, evidence. This particular error did not affect appellant's Guidelines range, but did result in a reduced restitution award. The panel consisted of Judges Wiener. Clement, and Elrod. Opinion by the Dutchman.

(wisenberg)

October 21, 2011 in Fraud, Sentencing | Permalink | Comments (2) | TrackBack (0)

Thursday, October 20, 2011

Reyes Conviction Affirmed

Gregory Reyes, former CEO of Brocades's conviction for securities fraud and making false filings with the SEC, falsifying corporate books, and false statements to auditors was affirmed by the Ninth Circuit.  The prior conviction had been vacated because of prosecutorial misconduct.  Convicted after a new trial, he argued that the case should be "dismissed because of (a) prosecutorial misconduct, (b) insufficient evidence of materiality to support his conviction, and (c) various evidentiary and instructional errors at trial."  The court rejected these arguments and affirmed the conviction.

Opinion here.

(esp)

October 20, 2011 in Judicial Opinions, Prosecutors | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 19, 2011

Dog Bites Man, Dewey Takes Manila, OPR "Exonerates" Lead Stevens Prosecutor

Surprise, surprise, surprise. According to Joe Palazzolo at WSJ's Law Blog, DOJ's Office of Professional Responsibility has cleared Brenda Morris of any wrongdoing whatsoever in the Ted Stevens case. The story is here.

(wisenberg)

October 19, 2011 in Obstruction, Prosecutions, Prosecutors | Permalink | Comments (0) | TrackBack (0)