Conviction upheld in bank fraud

A federal appeals court has upheld the securities fraud convictions and prison sentence of more than eight years for the former chief credit officer of United Commercial Bank in San Francisco, found guilty of trying to conceal the bank’s losses before it collapsed in 2009.

However, the Ninth U.S. Circuit Court of Appeals overturned the sentencing judge’s order that Ebrahim Shabudin reimburse the government for the nearly $1 billion in payments made by federal agencies that covered the bank’s losses. The court said Wednesday that Shabudin’s crimes were not the sole cause of the bank’s failure.

Shabudin, of Moraga, was convicted

in 2015 of seven felony charges involving a conspiracy by bank officials to falsify records that would have revealed millions of dollars in losses in 2008 and 2009.

United Commercial failed about a year after its parent company, UCBH Holdings, received almost $300 million from the U.S. Treasury’s Troubled Asset Relief Program. The program’s inspector general later found that United Commercial Bank executives, while seeking federal help after accumulating overdue loans, had tried to hide the bank’s deteriorating financial condition.

After the bank failed, the Federal Deposit Insurance Corp. transferred its deposits to East West Bank of Pasadena, which agreed to share the losses with the FDIC.

Shabudin was the bank’s chief operating officer in 2008 and 2009 and served from September 2008 until April 2009 as its chief credit officer, responsible for credit assessments of the bank’s loans. The bank’s senior financial officer, Craig On, and a senior vice president, Thomas Yu, pleaded guilty to conspiracy and testified against Shabudin.

In Wednesday’s ruling, the appeals court said that U.S. District Judge Jeffrey White may have given jurors a faulty instruction about Shabudin’s responsibility for his co-conspirators’ actions, but any such error would not have affected the verdict.

“The evidence heard by the jury amply supported its finding that Shabudin was guilty” of each of the fraud charges, the court said.

The three-judge panel also said White’s finding that Shabudin profited from his crimes by $348,000 — his salary for that year — supported his 97-month prison sentence, and an order to forfeit that amount to the government.

But the court said White’s restitution order of $946 million was excessive. There were other causes of the bank’s collapse, the panel said, including the nationwide economic recession that hit banks hard, as well as some bad real estate loans, approved earlier, that caused particular harm to UCB.

The court told White to try to determine Shabudin’s share of the blame, and, if that proves impossible, to consider eliminating the restitution order.

Ebrahim Shabudin was convicted in 2015 of seven felony charges involving a conspiracy to falsify records.