Fifth Third to Pay $6.5 Million Over SEC Accounting AllegationsJoshua Gallu
Fifth Third Bancorp agreed to pay $6.5 million to settle U.S. regulatory claims that it made improper disclosures about commercial real estate loans during the financial market turmoil of 2008.
Daniel Poston, who was Fifth Third’s chief financial officer at the time, agreed to pay $100,000 and to be suspended for one year from practicing as an accountant at a publicly-traded company, the Securities and Exchange Commission said in a statement today.
Fifth Third, Ohio’s biggest bank, experienced an increase in “non-performing assets” as the real estate market declined in 2007 and 2008, the SEC said. After deciding to sell the loans in the third quarter of 2008, the Cincinnati-based bank failed to classify them as “held for sale,” and instead continued to book them as investments, according to the agency.
“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. “It is important for investors to know the financial consequences of decisions made by management, so accounting rules that depend on management’s intent must be scrupulously observed.”
Proper accounting would have increased Fifth Third’s pretax loss for the third quarter of 2008 by 132 percent, the SEC said. Poston failed to direct the bank to properly classify and value the loans and also made inaccurate statements to auditors, the agency said.
Fifth Third spokesman Larry Magnesen said in a telephone interview that the bank, which resolved the SEC claims without admitting or denying wrongdoing, is pleased to have finalized the settlement. Paul Schoeman, Poston’s attorney at Kramer Levin Naftalis & Frankel LLP, didn’t immediately return a phone call seeking comment.