SEC Charges Fifth Third Bancorp and its Former CFO Daniel Poston with Fraud for Accounting Practices during the Financial Crisis

In the Matter of Fifth Third Bancorp and Daniel Poston, Admin. Proc. No. 3-15635.  On December 4, 2013, the SEC announced it filed a Settled Administrative Order Instituting Proceedings (“OIP”) against Fifth Third Bancorp and its former CFO Daniel Poston.
According to the OIP, the problems in the real estate market caused Fifth Third to have more “non-performing assets” as borrowers became unable to repay their loans.  The SEC alleges that Fifth Third decided to sell many troubled loans but failed to classify them as “held for sale” and value them at fair value as required by the relevant accounting rules.  If Fifth Third had accounted for these loans appropriately, its pretax loss for the relevant quarter would have increased by 132 percent.  Fifth Third improperly classified the loans as “held for investment,” which misleadingly implied that the company had not made the decision to sell them.  The OIP alleges that Poston knew about company’s plan to sell loans but did not require Fifth Third to classify and value them properly.  According to the OIP, Poston also made inaccurate statements to the company’s auditors and certified inaccurate financial results.  Fifth third and Poston agreed to settle without admitting or denying the allegations.  Fifth Third agreed to pay $6.5 million and Poston agreed to pay a $100,000. Pursuant to Rule 102(e) of the SEC’s Rules of Practice, Poston will also be suspended from
practicing as an accountant on behalf of any publicly traded company or other entity regulated by the SEC with the right to reapply for reinstatement after one year.  Fifth Third and Poston also consented to the entry of the OIP finding that they violated or caused violations of Sections 17(a)(2) and (3) of the Securities Act as well as the reporting, books
and records, and internal controls provisions of the federal securities laws.  They agreed to cease and desist from committing or causing any violations and any future violations of these provisions.

This entry was posted in Securities and tagged , , , , , . Bookmark the permalink.