Why it matters: A group of bank executives and board members were hit with fraud charges by the Securities and Exchange Commission (SEC), with the agency accusing the defendants of engaging in a scheme to mislead investors and bank regulators prior to the bank's failure in 2011. The 11 individuals associated with Superior Bank used straw borrowers, bogus appraisals, and insider deals to prop up the bank's financial condition, the SEC alleged, and the defendants extended, renewed, and rolled over bad loans to avoid impairment and the need to report losses in its financial accounting. The tactics used by the Alabama-based bank were an effort to conceal the extent of its losses as the bank faltered during the financial crisis and resulted in the bank overstating its net income in public filings by about 99 percent for 2009 and 50 percent in 2010, the SEC said. Nine of the defendants reached a deal with the agency, although the former president and a senior vice president are contesting the Florida federal court complaint. The individuals that settled neither admitted nor denied the SEC charges and are permanently banned from serving as officers or directors of a public company, with financial penalties ranging from $100,000 (for outside directors of the bank) up to $250,000 (assigned to the former CEO and chairman of the bank's holding company).
For a detailed discussion, please click here to read the full article in Manatt's 2/16 Financial Services Law newsletter.