December 7, 2023

SEC slaps GC with lifetime ban for role in bank failure



By Sue Reisinger, from Corporate Counsel

The federal government has permanently barred William Caughran, the general counsel for now-defunct Superior Bank and its holding company, Superior Bankcorp, from serving as an officer of a public company. And he must pay a $150,000 fine for his role in the bank’s alleged defrauding of investors.

Caughran, whose home phone in Pelham, Alabama, has been disconnected, could not be reached for comment. He did not admit or deny the civil fraud charges in the Jan. 13 settlement with the U.S. Securities and Exchange Commission, which accused the bank of propping up its financial condition by using straw borrowers, bogus appraisals and improperly extended bad loans.

In a statement Walter Jospin, director of the SEC’s Atlanta regional office, alleged that “pervasive fraudulent behavior rippled through the executive offices at Superior Bank in a calculated effort to mislead investors on the amount of loan losses and disguise the bank’s flailing financial condition.”

The SEC said the Birmingham, Alabama-based bank overstated its net income in public filings by approximately 99 percent for 2009 and 50 percent for 2010. The Federal Deposit Insurance Corp. took over the failed bank on April 15, 2011.

The agency charged 11 bank officers and directors with civil fraud, and nine of them, including Caughran, agreed to settle. He was named in six of the 15 fraud counts in the complaint.

According to the complaint, among other things Caughran:

• Participated in various meetings where he was made aware of the bank’s total credit exposure and its failing loans and financial position.

• Aided and abetted false SEC filings as a member of the bank’s certification committee, which purported to review and certify the bank’s quarterly and annual filings with the SEC.

• Reviewed memoranda of understanding with the Office of Thrift Supervision in 2010, which ordered the bank to decrease troubled assets and prohibited it from paying dividends; but failed to timely disclose the dividend restrictions to investors.

• Helped arrange a joint venture for a North Florida real estate developer who was in default, in a scheme to make the developer’s $4.3 million in loans appear current on paper, but which decreased the bank’s rights to collateral.

• Made false statements and failed to provide pertinent information to the bank’s chief accounting officer and outside auditors.

“Accurate and fair reporting of loan impairment is of paramount importance for financial institutions during periods of severe financial stress,” said Andrew Ceresney, director of the SEC’s Enforcement Division.

IMAGE: Photo by Tjook, via Flickr

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