NOVATO -- A senior officer at Circle Bank is one of 10 people alleged to have hidden the "deteriorating condition" of United Commercial Bank in San Francisco before it was shut down by regulators late 2009, according to an enforcement action filed Tuesday from the Federal Deposit Insurance Corp.
Christian Lee, listed in a February 2011 initial public offering registration statement with the Securities and Exchange Commission as Circle Bank's chief loan officer, was a senior vice president and director of commercial real estate at United Commercial, according to the FDIC. He worked at the San Francisco bank from October 1998 until the California Department of Financial Institutions closed the bank on Nov. 6, 2009, and turned it over to the FDIC.
Circle Bank hired Mr. Lee in August 2010, according to the preliminary prospectus.
Circle Bank spokesman Gary Tobin responded to an inquiry about the case with a statement from the bank, "As a matter of policy, we do not comment on matters which are in the legal system. In this case, the matter is one that involves a previous employer. Chris Lee remains an employee of Circle Bank. He has indicated to us that he does not wish answer questions from the media."
Named along with Mr. Lee in the FDIC notice of action were United Commercial President and CEO Thomas Shiu-Kit "Tommy" Wu, Chief Operating Officer Ebrahim Shabudin, Craig On, Senior Vice President Thomas T. Yu, John Kerr, Paul Montelaro, Lauren Tran, Yixing Sun and Ta-Lun Wu.
Charges against the group include falsifying SEC records, "sanitizing" books and records prior to audits, misrepresenting the bank's financial condition during face-to-face meetings and bringing past-due loans current by "artificial means," leading to a nearly $62 million understatement of charged-off loans, according to the FDIC allegations.
A hearing before an FDIC administrative law judge has not been set, according to the commission. If found to be in violation, Mr. Lee and the other former United Commercial employees would be prohibited from working for an FDIC-insured institution and may face civil money penalties ranging up to $500,000, as is being sought for Tommy Wu. Mr. Lee is facing a civil penalty of $100,000.
The FDIC notice claims that Mr. Lee was involved in misrepresenting the performance of a series of affiliated past-due parcel and construction loans at the bank between Dec. 2008 and April 2009. The bank reportedly extended a $5 million line of credit to a related entity to pay the interest, but did not inform auditors of the arrangement and ranked the loans among the best performing in their in-house risk assessment.
Also Tuesday, the U.S. Attorney's Office announced a federal grand jury charged Thomas T. Wu and Mr. Shabudin of conspiracy to commit securities fraud, securities fraud and falsifying corporate books and records. Both made initial appearances in San Francisco federal court Tuesday and were released on $500,000 bonds.
The FDIC has paid out about $397 million since taking over the bank and suffered total losses of around $2.5 billion. United Commercial Bank received $298 million from the Troubled Asset Relief Program's Capital Purchase Program in November 2008, purportedly didn't repay any of it and was the first recipient bank to fail, according to the indictment filed by the SEC and FBI.
In July 2010, the FDIC Inspector General issued a report on the bank's failure. "The primary reason for UCB’s failure was inadequate oversight by the board of directors and management," the report said. "In particular, UCB’s board and management failed to control the risks associated with the institution’s rapid expansion, which began in 2002."