Bethesda, Maryland-based Eagle Bancorp and its former CEO will pay a total of nearly $23 million in fines after settling Securities and Exchange Commission and Federal Reserve Board charges of violating insider lending regulations.
Former EagleBank Chief Executive Ronald D. Paul has also been barred from working in the banking industry.
Paul and EagleBank neither admitted or denied the charges in reaching the settlements.
The SEC’s charges alleged that from March 2015 and April 2018, EagleBank failed to include loans made to Paul’s family trusts, and improperly omitted tens of millions of dollars in loans to EagleBank directors and their family members. The loans to Paul’s family trusts totaled near $90 million. SEC regulations required disclosure of such transactions.
It also accused the bank of falsely stating in public statements that the loans were not related party loans and the bank was in compliance with loan requirements, after a short seller’s report in December 2017 that the bank had made significant undisclosed loans to Paul’s family trusts.
“Adequate disclosures of related party transactions are essential to enable investors to evaluate an issuer’s corporate governance. Here, faced with a short seller’s report alleging undisclosed related party loans by the bank, both Eagle and Paul failed to respond truthfully and accurately,” said Sanjay Wadhwa, deputy director of the SEC’s Enforcement Division.
EagleBank agreed to cease and desist from future violations and to pay disgorgement of $2.6 million, prejudgment interest of $750,493, and a civil penalty of $10 million. Paul agreed to a permanent injunction, and to a two-year officer and director bar, and to pay a total of $431,216 in SEC fines.
The Federal Reserve Board also settled its enforcement actions against EagleBank and Paul with a $9.5 million fine for improperly extending credit to entities owned or controlled by Paul, fined Paul $90,000 and permanently barred Paul from employment in the banking industry
“We are pleased that the SEC and FRB have approved the settlements and we can now put these legacy matters behind us and continue our focus on running one of the most profitable community banks in the Washington, D.C. region,” said EagleBank CEO Susan Riel.
EagleBank’s former General Counsel Laurence E. Bensignor was previously barred from banking for his role in EagleBank’s unsafe and unsound lending practices, the Federal Reserve said.