CINCINNATI – A federal agency said Wednesday that Fifth Third Bancorp will pay $6.5 million to settle charges of improper accounting of commercial real estate loans during the financial crisis.
The Securities and Exchange Commission announced Wednesday the settlement that also includes penalties for the bank’s former chief financial officer.
Cincinnati-based Fifth Third said last month it had reached a tentative agreement with SEC staff without admitting or denying the allegations. The bank said Nov. 5 that in connection with the proposed settlement Daniel Poston was replaced as chief financial officer and was named chief strategy and administrative officer. Fifth Third said Poston didn’t admit or deny the SEC allegations.
The SEC said Poston must pay $100,000 and is suspended from practicing before the SEC as an accountant. He can apply for reinstatement after one year.
As the real estate market slumped in 2007 and 2008, the number of borrowers failing to repay loans climbed. The SEC said Fifth Third decided to sell some of its problem loans, but continued to classify them as “held for investment” even though they should have been listed as “held for sale.” Correct accounting would have increased Fifth Third’s pretax loss for its 2008 third quarter by 132 per cent, the SEC said.
“Improper accounting by Fifth Third and Poston misled investors during a time of significant upheaval and financial distress for the company,” George Canellos, co-director of the SEC’s enforcement division, said in a statement. He added that “accounting rules that depend on management’s intent must be scrupulously observed.”
“We are pleased to have finalized a settlement, and we’re happy to put this matter behind us,” Fifth Third spokesman Larry Magnesen said.
A message was left for Poston’s attorney.
Fifth Third operates more than 1,300 banking centres in 12 states: Ohio, Kentucky, Indiana, Illinois, Michigan, Pennsylvania, West Virginia, Missouri, North Carolina, Tennessee, Georgia and Florida.