This case involves a criminal matter against a bank and its individual officers, involving the bank’s reporting and disclosures of various loans. The tranche of construction loans under dispute were past their written principal maturity dates, current on interest payments, and in process of roll over to a new loan via Change In Terms Agreement (CITA). The loans were automatically listed as “past due” in some of the bank’s internal tracking systems due to having passed the principal maturity date. However, the bank did not report the loans as “past due” in various filings, because they were in process for CITA, and because the loans were current on interest payments. The indictment alleges that failure to report loans meeting the above description as “past due” constitutes a criminal breach of SEC reporting requirements. The loan contracts state that the loan terms may be changed without notice to anyone but the borrower.
Question(s) For Expert Witness
1. Please describe your professional experience as it relates to the SEC.
2. Have you created, advised, or audited public filings in the financial services industry?
3. Are you familiar with a bank's reporting requirements for loans in SEC filings?
Expert Witness Response E-070879
I began my SEC experience as an auditor with KPMG at the beginning of my career. I worked on a variety of 1934 Act reporting issues for companies like General Mills and several financial institutions. I also managed the audit part of several 1933 Act offerings. I eventually left KPMG and went to work with a bank, where I began by managing the bank's IPO and then became Senior VP of Operations and ultimately CFO. I left the bank to teach at the University level for 12 years; in 2000 I left my university position to join the SEC Institute, where I developed and taught a variety of workshops dealing with SEC reporting requirements and GAAP. In 2014 the SEC Institute's programming assets were acquired by a legal education provider where I am now a director and workshop leader. I have audited financial institutions and reviewed their SEC filings while an auditor. I prepared the S-1, related amendments, initial Form 10-K and Forms 10-Q for the bank where I managed the IPO. Today, I frequently advise bankers and bank auditors about SEC reporting requirements, primarily for folks who have attended our workshops. With my experience, I am very familiar with the SEC's requirements and in particular how they apply to banks. The issue of the loan being reported as "past due" depends on the substance of the loan agreement. Generally, disclosure will be required if a loan is "contractually past due"; this will depend on the terms. In addition, guide three contains this requirement for Potential Problem Loans: "As of the end of the most recent reported period, describe the nature and extent of any loans which are not now disclosed pursuant to Item III.C.1. above, but where known information about possible credit problems of borrowers (which are not related to transfer risk inherent in cross-border lending activities) causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans pursuant to Item III.C.1." A salient question could be "why was the loan being rolled into a new loan?"
About the author
Joseph O'Neill
Joe has extensive experience in online journalism and technical writing across a range of legal topics, including personal injury, meidcal malpractice, mass torts, consumer litigation, commercial litigation, and more. Joe spent close to six years working at Expert Institute, finishing up his role here as Director of Marketing. He has considerable knowledge across an array of legal topics pertaining to expert witnesses. Currently, Joe servces as Owner and Demand Generation Consultant at LightSail Consulting.
