FOR IMMEDIATE RELEASE
Washington, D.C., Oct. 11, 2011 – The Securities and Exchange
Commission today charged former bank executives with misleading investors about
mounting loan losses at San Francisco-based United Commercial Bank during the
height of the financial crisis in 2008 and 2009.
The SEC alleges that the bank’s former chief executive officer Thomas Wu,
chief operating officer Ebrahim Shabudin, and senior officer Thomas Yu concealed
losses on loans and other assets from the bank’s auditors, causing the bank’s
public holding company UCBH Holdings Inc. (UCBH) to understate 2008 operating
losses by at least $65 million (approximately 50 percent). A few months later,
continued declines in the value of the bank’s loans led the bank to fail, and
the California Department of Financial Institutions closed the bank and
appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. United
Commercial Bank was one of the 10 largest bank failures of the recent financial
crisis, causing a loss of $2.5 billion to the FDIC’s insurance fund.
“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,”
said Robert Khuzami, Director of the SEC’s Division of Enforcement. “But
accountability for these executives begins today.”
Marc Fagel, Director of the SEC’s San Francisco Regional Office, added, “This
investigation shows how federal regulators can work together to ferret out fraud
by the guardians of financial institutions entrusted to deal honestly with
According to the SEC’s complaint filed in federal court in San Francisco,
UCBH and its subsidiary United Commercial Bank grew rapidly, doubling in size
after an initial public offering in 1998. It was the first U.S. bank to acquire
a bank in the People’s Republic of China, and Wu was considered a rising star in
the banking industry. By 2009, however, Wu found himself at the helm of a bank
on the brink of failure.
The SEC alleges that Wu, Shabudin, and Yu deliberately delayed the proper
recording of loan losses, and each committed securities fraud by making false
and misleading statements to investors and UCBH’s independent auditors. During
December 2008 and the first three months of 2009 as the company prepared its
2008 financial statements, Wu, Shabudin, and Yu were aware of significant losses
on several large loans. Among other things, these executives allegedly learned
about dramatically reduced property appraisals and worthless collateral securing
the loans, yet they repeatedly hid this information from UCBH’s auditors and
The SEC’s complaint also alleges that the bank’s former chief financial
officer Craig On acted negligently by misleading the company’s outside auditors
and aiding the filing of false financial statements. On agreed to settle the SEC
charges without admitting or denying the allegations. He will be permanently
enjoined from violating certain antifraud, reporting, record-keeping, and
internal controls provisions of the federal securities laws and will pay a
$150,000 penalty. On also consented to an administrative order suspending him
from appearing or practicing before the SEC as an accountant, with a right to
apply for reinstatement after five years.
The litigation against the other defendants is ongoing.
Lloyd Farnham, Michael Fortunato, Jason Habermeyer, and Cary Robnett of the
SEC’s San Francisco Regional Office conducted the SEC’s investigation. The SEC’s
litigation will be handled by Lloyd Farnham and Robert Mitchell.
The U.S. Attorney for the Northern District of California today announced
parallel criminal charges against former employees of the bank, and the FDIC
announced enforcement actions against 13 individuals for violations of federal
The SEC acknowledges the assistance of the FDIC, U.S. Attorney’s Office for
the Northern District of California, Federal Bureau of Investigation, Office of
the Special Inspector General for the Troubled Asset Relief Program (SIGTARP),
FDIC’s Office of Inspector General, and Office of Inspector General for the
Board of Governors of the Federal Reserve System.