The Securities and Exchange Commission (SEC) today filed a complaint against three former executives of a San Francisco bank, accusing them of misleading investors about mounting bank loan losses that led to one of the ten largest bank failures of the 2008/2009 financial crisis.

The SEC alleges that the bank's former CEO, Thomas Wu, 53, of Hillsborough, Calif.; the former COO, Ebrahim Shabudin, 63, of Moraga, Calif.; and former senior officer, Thomas Yu, 48, of San Ramon, Calif., concealed losses on loans and other assets from United Commercial Bank's auditors, causing the bank's public holding company UCBH Holdings Inc. to understate its 2008 operating losses by about 50%.

When UCBH filed its 2008 Form 10-K annual report with the SEC on March 16, 2009, the reported loss of $134 million was understated by at least $65 million, according to the SEC.

A few months later, continued declines in the value of the bank's loans caused the bank to fail, and the California Department of Financial Institutions closed the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.

United Commercial Bank was one of the ten largest bank failures of the financial crisis, causing a loss of $2.5 billion to the FDIC fund.

The U.S. Attorney for the Northern District of California today also announced parallel criminal charges against former employees of the bank, and the FDIC announced enforcement actions against 13 individuals for violations of federal banking regulations.

"Today's charges reflect an all too familiar pattern-corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces," said Robert Khuzami, director of the SEC's Division of Enforcement. "But accountability for these executives begins today."

The SEC's complaint, filed in federal court in San Francisco, alleges that UCBH and its subsidiary United Commercial Bank grew rapidly, doubling in size after an initial public offering in 1998. UCBH was the first U.S. bank to acquire a bank in the People's Republic of China.

Wu, who once was considered a rising star in the banking industry, by 2009 found himself at the helm of a bank on the brink of failure, according to the SEC.

The SEC also alleges that as the UCBH prepared its 2008 financial statements in early 2009, Wu, Shabudin, and Yu were aware of significant losses on several large loans. The SEC claims that the executives  learned about dramatically reduced property appraisals and worthless collateral securing the loans, yet they repeatedly hid this information from UCBH's auditors and investors.

Litigation against the three former bank executives is still ongoing, SEC officials said.

The SEC's complaint also alleges that the bank's former CFO, Craig On, acted negligently by misleading the company's outside auditors and aiding the filing of false financial statements. On, 59, of Berkley, Calif., has agreed to settle the SEC charges without admitting or denying the allegations.

On will be permanently enjoined from violating certain antifraud, reporting, record-keeping, and internal controls provisions of the federal securities laws and will pay a $150,000 penalty, according to the SEC. On also agreed to an administrative order that suspends him from appearing or practicing before the SEC as an accountant. He has the right to apply for reinstatement in five years.

-Jim McConville