New | US bank catering to Chinese-Americans acquitted of larceny, conspiracy
Abacus Federal Savings Bank , which caters to the Chinese-American community in New York, New Jersey and Pennsylvania, was found not guilty of grand larceny and conspiracy on Wednesday after a three-month trial for the alleged sale of hundreds of millions of dollars worth of fraudulent mortgages to Fannie Mae, lawyers involved in the case said.
Two executives at the bank were acquitted on all charges.
Yiu Wah Wong, the bank’s chief credit officer, and Wai Hung "Raymond" Tam, the loan origination supervisor, were found not guilty of about 80 counts each, the lawyers said.
The jury in New York state court in Manhattan is still mulling charges of mortgage fraud and falsifying business records against the bank, the lawyers said. Deliberations are scheduled to continue on Thursday morning.
Abacus is believed to be the only bank to face a criminal trial in the United States on charges of mortgage fraud in the run-up to the financial crisis.
Unlike other banks, however, Abacus’s loans did not have a high default rate; rather its loans are still performing, meaning monthly mortgage payments are being made by borrowers.
Loan defaults greatly contributed to the financial crisis. As loans became delinquent, mortgage-backed securities collapsed, helping to trigger wider problems in the financial system.
US prosecutors have been criticized by investors and politicians for not bringing criminal charges against senior bank executives and major financial institutions for mortgage fraud.
Several banks, including JPMorgan Chase & Co and Bank of America Corp, have paid multi-billion dollar penalties.
The charges against Abacus and its executives were over the sale of allegedly fraudulent loans to Fannie Mae between 2005 and the beginning of 2010.
Prosecutors claimed the defective loans falsely represented applicants’ credit worthiness, employment, income and source of downpayments. They claimed the bank and its managers trained and directed the routine falsification of documents.
"We can’t discover the falsity underlying these loan documents and then sit around, waiting for a mortgage awarded based on them to stop performing," Manhattan Assistant District Attorney Rachel Hochhauser told the jury in her summations.
During the trial, the jury heard the testimony of five former employees of Abacus who pleaded guilty to crimes connected to the case. Several others also pleaded guilty, prosecutors said.
But in Abacus’s closing arguments, the bank’s lawyer, Kevin Puvalowski, called the state’s case "a bizarro prosecution," and said Abacus’s loans went to borrowers capable of paying them, as shown by the fact that they did so.
The bank has one of the lowest default rates in the country, the attorney said, citing a rate of about 0.3 per cent versus a nationwide average of 6.6 per cent, 20 times higher.
"The supposed victim in this case, Fannie Mae, hasn’t lost a dime," Puvalowski said.
The bank attorney could not be reached for comment after the partial verdict. Tam’s lawyer, Thomas Rotko, and Wong’s lawyers, Andrew Muccigrosso and Sanford Talkin, said their clients had maintained their innocence and they were pleased the jury agreed.
A spokeswoman for the Manhattan District Attorney declined comment with the jury still deliberating. A spokesman for Fannie Mae also declined comment.
