Last week the Commission declined to prosecute a senior executive at AXA Rosenberg who entered into a cooperation agreement. The announcement detailed the reasons for the action, including his assistance to the staff as well as the fact that he had a limited role in the fraud and had retired from the securities business.

The Commission this week acknowledged that John Cinderey has also entered into a cooperation agreement and assisted the staff. Unlike the AXA Rosenberg executive however, Mr. Cinderey was named as a defendant in an enforcement action and settled. SEC v. Cinderey, Civil Case No. CV 12-1519 (N.D. Cal. Filed March 27, 2012).

Mr. Cinderey was an executive vice president of United Commercial Bank, a wholly owned subsidiary of publically traded UCBH Holdings, Inc. He headed the commercial banking division.

As the market crisis unfolded in 2008 the real estate market declined resulting in increasing loan delinquencies and decreasing collateral values for the bank’s portfolio of commercial and construction loans. In the second half of the year overdue loans and defaults increased. The bank sought and received funds from TARP. Nevertheless, by November 6, 2009 the bank was closed and an FDIC receiver was appointed.

Prior to the failure of the bank, its former CEO Thomas Wu, former COO Ebrahim Shabudin and former EVP Thomas Yu deliberately delayed the proper recording of loan losses as the company prepared its 2008 financial statements, according to a Commission enforcement action. SEC v. Wu, Civil Case No. CV-11-4988 (Oct. 11, 2011). Mr. Cinderey, was responsible for answering a number of requests from the auditors for additional information about risk ratings and collateral valuations for certain large commercial and construction loans. During that process Mr. Cinderey is alleged to have altered memoranda addressing the risks associated with certain large loans and potential losses the bank faced which were furnished to the auditors. In one instance, after consulting with his superiors, Mr. Cinderey furnished a requested memorandum to the auditors about a large construction loan, omitting certain information and adding misleading statements regarding the borrowers. In another instance he furnished the auditors incomplete or misleading information to support the risk rating for a loan to developers building a large block of condominiums.

In taking these and other actions Mr. Cinderey circumvented the internal controls of the bank, according to the complaint. The complaint alleges that the defendant aided and abetted violations of Exchange Act Section 13(b)(2)(A) and violated Exchange Act Section 13(b)(5) and the related Rules.

Mr. Cinderey resolved the charges, consenting to the entry of an injunction based on the Sections and Rules cited in the complaint, without admitting or denying its allegations. He did not pay a civil penalty in part based on a $40,000 civil penalty paid in an FDIC administrative proceeding. The terms of the settlement also reflect his cooperation and the fact that he entered into a cooperation agreement, according to the Commission’s Litigation Release. Lit. Rel. No. 22309 (March 27, 2012).

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