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Fraud Friday — Bank Chief Credit Officer Trial Begins

February 20, 2015

By Bob Coleman
Editor, Fraud Friday

The trial has begun for the former Chief Operating Officer and Chief Credit Officer of San Francisco-based United California Bank.

The crime? Ebrahim Shabudin allegedly hid loan losses.

UCB was the ninth-largest bank to fail during the financial crisis. A TARP recipient, the $298 million taxpayer investment was a complete loss.

Another UCB executive has pled guilty. The former manager of credit risk and portfolio, Thomas Yu is expected to receive a reduced sentence in return for his testimony against Shabudin.

Reports Reuters’ Dan Levine:

In an Oakland, California federal court on Tuesday, assistant U.S. attorney Adam Reeves said Shabudin “deliberately chose the wrong road” by hiding from auditors the plummeting value of the collateral which secured the bank’s biggest loans.

However, Shabudin attorney James Lassart argued that the COO had wide ranging responsibilities at the bank and was “totally reliant” on other executives to handle the details of loan accounting. Lassart also suggested that the government’s TARP loans to UCB were driving the decision to pursue a case against Shabudin.

“I would think that would lead to some embarrassing feelings,” Lassart said.

UCB ex-chief executive Thomas Wu faces a civil lawsuit brought by securities regulators, but he was not criminally charged. During the government’s opening statement, Reeves said Shabudin acted to please the “often despotic” Wu and was the one senior executive who could have stood up to boss.

Reeves did not explain why Wu was not charged. Last month U.S. District Judge Jeffrey White ruled that Shabudin’s attorneys could not raise questions before the jury about why Wu was not prosecuted as well.

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