http://www.reuters.com/article/2015/02/17/us-fraud-tarp-trial-idUSKBN0LL10G20150217

U.S. bank exec ‘cooked the books’ to hide bad loans: prosecutor

Tue, Feb 17 2015

By Dan Levine

OAKLAND, Calif. (Reuters) – The former chief operating officer of a major Chinese-American bank in San Francisco knowingly “cooked the books” in an effort to conceal deteriorating loans at the height of the 2008 financial crisis, a U.S. prosecutor said in court.Opening statements began on Tuesday in a securities fraud trial against former United Commercial Bank executive Ebrahim Shabudin, a rare criminal prosecution connected to the government’s bank bailout program.

UCB received $298.7 million from the Troubled Asset Relief Program during the financial meltdown. The ninth-largest bank to fail during the crisis, UCB catered to California’s Asian community and expanded rapidly before regulators closed it in 2009. Its operations were eventually taken over by East West Bancorp Inc.

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.

An attorney for Wu could not immediately be reached for comment.

Two former UCB executives pleaded guilty and will testify in the hopes of receiving a reduced sentence, Reeves said, and the government has agreed not to charge two other former bank officials who are also set to take the stand.

Shabudin settled claims brought by the SEC without admitting wrongdoing, and agreed to pay a $175,000 civil penalty in 2013.

The criminal case in U.S. District Court, Northern District of California is United States of America vs. Ebrahim Shabudin, 11-cr-664.