Sterling, Michigan pleads guilty for securities fraud

Endeavor Moore Media – stock.ado Sterling Bancorp, Southfield, Michigan pleaded guilty to securities fraud. The legal issue was related to Sterling’s tarnished Advantage Loan Program (or ALP). After discovering fraud and firing many employees, the company ended its low-documentation mortgage product in 2019. In a press release, the company announced that it had reached a plea agreement to the U.S. Department of Justice. It pleaded guilty to one count in securities fraud and agreed $27.2 million in restitution for shareholders. It also agreed that it would improve its internal controls and compliance program. Sterling was required to revise 2022 financial results. It reported a loss of $14.2million for the full year 2022. The guilty plea ends a long-running DOJ investigation that had led to a loss of $4 million in full-year income. The release stated that this was a serious charge that the company’s board had considered for years. “In the end we concluded that the long-running fraud in residential mortgage loans under ALP was undeniable. This was known to the founder and some former members of senior management at that time. It was vital to the company’s long-term success and the benefit of its shareholders to accept the DOJ charge and resolve this matter. “Scott Seligman, who founded Sterling Savings and Loan Association in 1984, was a predecessor bank. “Scott Seligman founded Sterling Savings and Loan Association, a predecessor bank, in 1984. The program required a minimum 35% down payment and charged higher rates and fees than generally were available elsewhere in the market, but it did not require the submission of typical loan documentation such as tax returns or payroll records.Even so, under pressure to bolster revenue leading up to and following the IPO, the DOJ said Sterling loan officers falsified documents and concealed information from the bank’s underwriting teams, and they did so with the knowledge and encouragement of Sterling’s founder and certain members of senior management.Sterling’s agreement with the DOJ does not end ongoing litigation between the bank and Seligman.The bank, in a suit filed in the U.S. District Court for the Eastern District of Michigan last year, is seeking to claw back millions of dollars in dividends and other payments from the former CEO, claiming he masterminded the fraudulent loan program. Seligman denied the allegations and filed a countersuit to the DOJ in 2022. I want to assure all our constituents that Sterling continues to have a strong capital position and a high proportion of liquid assets relative to total assets. This is in contrast to the rest of the industry. We took great care to increase liquidity in 2020, so that we could deal with any repercussions from Advantage Loan Program,” O’Brien stated in the release. O’Brien said that there is no balance sheet exposure to crypto-related companies or startups/early-cycle tech companies. “I am also pleased to note that deposit levels for the first quarter 2023 have remained relatively steady and that I have not seen any significant outflows of funds in the past week. Overall, I am very confident about our financial resilience.