Mug Shot Monday — Former Chief Credit Officer Found Guilty of Bank Fraud for Undervaluing Loan Loss Reserve

By Bob Coleman
Editor, Mug Shot Monday

The former Chief Credit Officer and Chief Operating Officer of failed Northern California, United Commercial Bank, was convicted of seven counts of bank fraud by a jury last week.

Now, 66 year old Ebrahim Shabudin faces hundreds of years in jail , and millions of dollars in fines.

The jury found Ebrahim guilty of conspiring with others within the bank to falsify the loan loss reserve to conceal millions of dollars in losses and to falsely inflate the bank’s financial statements.

‘While Shabudin’s criminal scheme was complex, the bottom line is that this TARP bank senior officer had the chance to do the right thing, and he chose not to do it,’ says Christy Romero, SIGTARP (Special Inspector General for TARP)

‘Testimony at trial revealed that in an effort to have the bank ‘break even’ in the third quarter 2008, Shabudin delayed downgrading loans despite knowing that collateral had declined in value or was missing out of an unfounded hope that something would change. He and his
co-conspirators continued this ‘delay-and-pray’ scheme the next quarter, all while the bank applied for and received $298 million in TARP. The federal jury’s decision to convict Ebrahim Shabudin marks the third criminal conviction of a United Commercial Bank officer.

‘After receiving TARP in November 2008, UCB failed less than a year later, leaving $298 million in losses on taxpayers’ TARP investment in the bank.

Adds U.S. Attorney Melinda Haag, “UCB is one of the largest criminal prosecutions brought by the U.S. Department of Justice of wrongdoing by bank officers arising out of the 2008 financial crisis.

‘With actual losses exceeding a half a billion dollars, the prosecution of Shabudin and other senior officers at UCB is one of the most significant financial fraud cases in the history of the Northern District of California

The jury convicted Shabudin of one count of conspiracy to commit securities fraud; one count of securities fraud; one count of falsifying corporate books and records; one count of false statements to accountants; one count of circumventing internal accounting controls; one count of conspiracy to commit false bank entries, reports, and transactions; and one count of false bank entries, reports, and transactions.

In 2008, UCB received $298 million in TARP funds.

When the bank failed and was taken over by the FDIC on Nov. 6, 2009, the full TARP investment was lost.

With over $10.9 billion in assets, UCB’s failure was the ninth largest bank failure since 2007 with an estimated loss of approximately $677 million.

On Dec. 9, 2014, UCB’s chief financial officer, Craig S. On, pleaded guilty to one count of conspiracy to make a materially false and misleading statement to an accountant.

On Oct. 7, 2014, the bank’s senior vice president, Thomas Yu, pleaded guilty to charges of conspiracy to commit false bank entries, reports, and transactions related to his preparation of false and misleading reports.

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