InfoBytes Blog
Former Chief Credit Officer Sentenced to Over Eight Years in Prison for Role in Securities Fraud Scheme
On September 1, Ebrahim Shabudin, the former Chief Credit Officer of a San Francisco-based bank, was sentenced to 97 months in prison for his involvement in a securities fraud scheme stemming from the bank’s 2009 financial collapse. In 2008, the Troubled Asset Relief Program (TARP) gave the bank roughly $298 million in federal funds. The FDIC took over the bank in 2009 and stated that it was “the ninth largest failure since 2007 of a bank insured by the FDIC’s Deposit Insurance Fund.” In 2013, the FDIC estimated that the bank would accrue losses exceeding $1.1 billion; however, with the United States’ economic recovery, the estimated loss dropped to approximately $677 million.
The DOJ charged Shabudin with “conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and falsely inflate the bank’s financial statements.” Shabudin allegedly falsified records filed with the SEC and the FDIC pertaining to the bank’s 2008 third and fourth quarters and year-end earnings per share. On March 25, 2015, Shabudin was found guilty on seven charges: (i) conspiracy to commit securities fraud; (ii) securities fraud; (iii) falsifying corporate books and records; (iv) false statements to accountants; (v) circumventing internal accounting controls; (vi) conspiracy to commit false bank entries; and (vii) false bank entries. In addition to the prison sentence, U.S. District Judge White ordered the former Chief Credit Officer to undergo three years of supervised release and pay $348,000 in restitution. Both the bank’s CFO and Senior Vice President pleaded guilty to similar charges last year and currently await sentencing.