U.S. takes action against failed California bank execs

Three former United Commercial Bank executives misled investors by concealing at least $65 million in loan losses before the San Francisco lender collapsed in 2009, the U.S. Securities and Exchange Commission said.

Thomas Wu, who was the bank’s chief executive, worked with Chief Operating Officer Ebrahim Shabudin and senior officer Thomas Yu to hide losses on loans and real estate assets from auditors, causing the bank’s parent, UCBH Holdings Inc., to understate 2008 operating losses, the SEC said in a complaint filed Tuesday.

United Commercial Bank was one of the 10 largest bank failures to result from the 2008 financial crisis, causing a loss of $2.5 billion to the Federal Deposit Insurance Corp.’s insurance fund, the SEC said. Craig On, the bank’s former chief financial officer, separately agreed to pay $150,000 and accept a five-year suspension from practicing before the SEC as an accountant to resolve claims that he helped the fraud, the agency said.

“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,” SEC Director of Enforcement Robert Khuzami said in a statement. “Accountability for these executives begins today.”

The U.S. attorney for the Northern District of California announced parallel criminal charges against former employees of the bank, and the FDIC announced enforcement actions against 13 individuals for violations of federal banking regulations.

Phone calls to attorneys for Wu, Shabudin, Yu and On weren’t immediately returned. On didn’t admit or deny wrongdoing in settling the SEC’s claims.