Two former bank executives have been indicted on charges of “conspiracy to commit securities fraud, securities fraud, falsifying corporate books and records and lying to auditors.” As a result of their alleged crimes, the federal government may have lost $298 million in Troubled Asset Relief Program (TARP) funds irretrievably. Ebrahim Shabudin and Thomas Yu, respectively the former chief credit officer and chief operating officer of the now-defunct United Commercial Bank (UCB), are accused of “fraudulent accounting maneuvers and techniques” that hid the true financial condition of the lender from the U.S. Department of the Treasury, enabling the bank to qualify for TARP money. Christy Romero, acting Special Inspector General for TARP (SIGTARP), stated that the two were connected to “a scheme to defraud investors, which included the Treasury, and by extension the American taxpayer.” Romero promised to “tirelessly work” to recover funds and uncover fraud at TARP banks, but warned that in the case of UCB the funds were loss. The FDIC is projected to lose a total of $2.5 billion as a result of the bank’s failure.
Although Shabudin’s lawyer could not be reached for comment, Wu’s lawyer boldly claims that the federal government and bank regulators are looking for a scapegoat. “Hundreds of banks failed in the financial crisis, and the regulators need to blame someone,” Steven Bauer said. Recently UCB’s former chief financial officer, Craig On, settled an SEC lawsuit by paying $150,000 and neither admitting nor denying wrongdoing.
Do you think that these lawsuits will end up the same way? Should any of these executives be punished?
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