Pioneer forced to restate earnings over fraud case
Changes do not drastically alter bank’s financial standing
An investigation by the U.S. Securities and Exchange Commission into Pioneer Bank’s handling of the $100 million bank fraud scheme of former customer Michael Mann has led the bank to restate financial statements relied upon by investors and stockholders to value the bank’s stock.
Although the accounting changes that Pioneer’s holding company — known as Pioneer Bancorp — was forced to make do not drastically change the bank’s financial standing, they reveal the depth to which the Colonie-based bank has had to answer to both state and federal regulators to Mann’s fraud, which federal prosecutors estimate to have cost Mann’s customers and lenders $100 million, making it one of the largest fraud cases in Capital Region history.
Shortly after Mann’s scheme was uncovered just before Labor Day weekend of 2019, Pioneer Bank told stockholders that it had suffered a $15.8 million loss on a $42 million line of credit that Pioneer Bank had given Mann’s companies with two other banks, Berkshire Bank and Chemung Canal Trust Co., which goes by Capital Bank locally.
Both banks are suing Pioneer Bank, alleging they were kept in the dark about Mann’s true finances.
Pioneer’s restatement of its finances actually helped the bank on paper. It went from having a $8.8 million loss during the last six months of 2019 — the period during which the fraud was uncovered — to having a $2.8 million profit.
“As this filing of Pioneer Bancorp, Inc. provides, the restatement of the consolidated financial statements results from a technical accounting correction to reflect certain effects pertaining to the unique circumstances surrounding the Michael Mann Entities,” Pioneer Bank spokesman Schuyler Bull told the Times Union. “This technical accounting correction is not a result of any new facts coming to light.”
Mann pleaded guilty last fall to 12 felonies in federal court in Albany including bank fraud, wire fraud, identity theft and filing false tax records related
to tens of millions of dollars in loans he obtained by lying to Pioneer Bank and other lenders to fund various businesses, including a Clifton Park payroll software company called Mypayrollhr.
Mann faces anywhere from 17 years to 32 years in federal prison under sentencing guidelines.
He has been living with his family in North Carolina awaiting sentencing.
Mann also will be ordered to pay $101 million in restitution to his victims. His sentencing is scheduled for August in U.S. District Court in Albany.
Mann has admitted to federal prosecutors that he used the cash flow from his payroll business to inflate his bank accounts and keep current on millions of dollars of loans he obtained by falsifying his business records.
The SEC, which regulates companies like Pioneer that have publicly-traded stock, began asking Pioneer executives in July 2020 to provide more information about Mann and how his fraud impacted the bank’s finances. Pioneer Bank had wrongly classified the loan-gone-bad, the SEC claimed.
Much of the issues that the SEC had questioned Pioneer Bank about have already been explained in both the federal criminal case and several civil cases in state and federal court.