The good news is that we finally have the second group ofindictments of senior bank officers. The prosecution involves officers of United Commercial Bank (UCB), a roughly $10 billion San Francisco bank that originally specialized in lending to Chinese-Americans and became primarily a commercial real estate (CRE) lender. The indictment deals only withthe cover up phase of UCB’s senior officers’ frauds. I will show in future posts that the reportedfacts on UCB’s loans were consistent with accounting control fraud. The UCB case is so rich in lessons that itwill take a series of articles to capture what the case reveals about thedegradation of regulation and prosecution of elite accounting controlfrauds.
Here are the most essential facts. In 2002,a court found that UCB’s senior managers had engaged in fraud to hide losses ona large loan for the purpose of fraudulently inducing another bank to bear thelosses. It found the senior officers’conduct so outrageous that it awarded substantial punitive damages. The FDIC, the SEC, and the Department ofJustice did nothing in response to the fraud.