SEC Charges Bank Holding Company/CEO With Misleading Investors During Financial Crisis
On January 18, 2011, the Securities and Exchange Commission (SEC) filed a civil complaint alleging securities fraud by BankAtlantic Bancorp, Inc. (BankAtlantic) and its Chief Executive Officer (who also served as Chairman), and seeking monetary penalties from BankAtlantic and the CEO, and an injunction prohibiting the CEO from serving as a director or officer of a public company.
The SEC complaint alleges that BankAtlantic and the CEO made misleading statements in public filings and earnings calls regarding the declining condition of BankAtlantic’s commercial real estate loan portfolio during the first half of 2007. It also alleges that while BankAtlantic and the CEO were trying to sell certain commercial loans, BankAtlantic and the CEO purposefully failed to classify certain loans as “loans held for sale” and write down these loans to lower of cost or fair value, thus significantly understating BankAtlantic’s losses during 2007.
These securities fraud charges reflect the SEC’s aggressive stance with regard to allegedly misleading financial reports or statements made by financial institutions and their officers during the financial crisis. Importantly, in this matter the SEC alone has initiated legal action for civil damages and injunctive relief and not as part of a criminal claim brought by the Department of Justice. The SEC continues to investigate a significant number of financial institutions, in some instances in coordination with the Department of Justice and the federal banking agencies. As these investigations progress we expect the SEC and other governmental agencies to file additional civil and criminal complaints against executives of financial institutions for alleged violations of federal securities laws.
The SEC’s press release regarding the BankAtlantic complaint may be accessed here, and the full complaint is available here.
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