U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22309 / March 27, 2012
Securities and Exchange Commission v. John M. Cinderey, Civil Case No. CV-12-1519 (N.D. Cal.)
SEC FILES SETTLED CHARGES AGAINST FORMER BANK EXECUTIVE WHO MISLED AUDITORS
The Securities and Exchange Commission today charged a former bank employee with misleading the bank’s independent auditors regarding risks the bank faced on certain outstanding loans. The SEC alleges that John Cinderey, a former executive vice president at San Francisco-based United Commercial Bank, acting at the direction of his superiors, misled the outside auditors evaluating financial statements of the bank and its public holding company, UCBH Holdings, Inc.
In a complaint filed in federal court in San Francisco, the SEC alleges that during the financial crisis in 2008 and 2009, Cinderey altered memoranda prepared for the independent auditors. The complaint also alleges that Cinderey circumvented accounting controls and policies that required the bank to accurately assess the risks associated with loans, and alleges that delays in accurately evaluating the risks in some cases could affect the bank’s loan loss reserves and interest income.
Cinderey agreed to settle the SEC charges without admitting or denying the allegations. He will be permanently enjoined from violating provisions of the federal securities laws regarding record-keeping, misleading outside auditors, and internal controls. Cinderey will not pay a civil penalty in this case in part based on a $40,000 civil penalty he paid in an administrative action brought by the Federal Deposit Insurance Corporation (FDIC). The terms of the settlement also reflect credit given to Cinderey by the Commission for his substantial assistance in the investigation and the fact that he has entered into an cooperation agreement to assist in an ongoing related enforcement action.
The Commission has previously charged senior executives at the bank and UCBH with committing securities fraud by making false and misleading statements to investors and UCBH’s independent auditors. In a complaint filed in U.S. District Court in San Francisco on October 11, 2011, Case No. 11-CV-04998, the Commission alleges that former CEO Thomas Wu, former Chief Operating Officer Ebrahim Shabudin, and former executive vice president Thomas Yu deliberately delayed the proper recording of loan losses as the company prepared its 2008 financial statements. SEC Litigation Release No. 22121.
The SEC’s complaint charges Cinderey with aiding and abetting UCBH’s violations of Sections 13(b)(2)(A) of the Securities Exchange Act of 1934 (Exchange Act), circumventing accounting controls in violation of Section 13(b)(5) of the Exchange Act, and falsifying books and records and making false or misleading statements to auditors in violation of Exchange Act Rules 13b2-1 and 13b2-2.
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.