U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20882 / February 4, 2009
Accounting and Auditing Enforcement Release No. 2930 / February 4, 2009
Securities and Exchange Commission v. Mark T. Turkcan, 4:09-CV-00204 (E.D. Mo., filed Feb. 4, 2009)
Commission Charges Mark T. Turkcan with Fraud
The Securities and Exchange Commission ("Commission") announced today that it filed a complaint in the United States District Court for the Eastern District of Missouri alleging that Mark T. Turkcan ("Turkcan"), the former President of First Bank Mortgage ("FBM"), defrauded investors by engaging in a scheme to misstate the net income of FBM and its parent First Banks, Inc. from at least 1990 through April 2008.
The Commission alleges that Turkcan, a resident of Kirkwood, Missouri, carried out his scheme by secretly obtaining money from third-party brokerage firms through the surreptitious use of repurchase transactions, which are essentially collateralized loans, and improperly disguising the money obtained from those transactions as gains from trading mortgage-backed securities. According to the complaint, Turkcan circumvented First Banks, Inc.'s internal controls and concealed his scheme by lying to his staff and his superiors, falsifying and fabricating documents, and providing false and misleading information to First Banks, Inc. and its outside auditor. Specifically, the complaint alleges that Turkcan fabricated trade tickets and confirmations and prepared a handwritten report each month that included fictitious trading gains, which he provided to his staff for entry into FBM's accounting system. The complaint also alleges that Turkcan created a register that included the fictitious trading gains and provided it to First Banks, Inc.'s outside auditor in connection with its annual audits of First Bank, Inc.'s consolidated financial statements.
The Commission further alleges that as a result of Turkcan's scheme, First Banks, Inc. incurred an undisclosed obligation of approximately $35 million and materially misstated its net income in filings with the Commission. The complaint alleges that as a result of Turkcan's scheme, First Banks, Inc. overstated its net income in its public filings by approximately: $5.3 million (or 10.2%) in 2007; $3.5 million (or 3.2%) in 2006; $1.4 million (or 1.5%) in 2005; and $1.3 million (or 1.6%) in 2004, and understated its net income by approximately $800,000 (or 1.3% in 2003).
On July 30, 2008, First Banks, Inc. restated its financial results for the years 2005 through 2007 and disclosed that it had discovered material misstatements in its financial statements arising out of the circumvention of established internal controls and material weaknesses in its internal controls over financial reporting.
The Commission's complaint charges Turkcan with violations of Section 17(a) of the Securities Act of 1933, Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, and 13b2-2 thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and seeks a permanent injunction, disgorgement, civil penalties, prejudgment interest, and an officer and director bar.