Financial services firm Sterling Bancorp agreed Wednesday to plead guilty to securities fraud, including a $27.2 million fine, which will go toward paying restitution.
The Michigan-based bank holding company pleaded guilty to one count of securities fraud, under terms of the plea agreement, according to the Justice Department.
The company also will serve a probation term through 2026. Officials are not seeking a criminal fine in the case.
Sterling committed $69 million worth of securities fraud. Prosecutors contend it filed false statements related to its initial public offering in 2017, as well as its subsequent financial statements in 2018 and 2019.
The bank allegedly encouraged its employees to push its Advantage Loan Program to customers in the lead-up to the IPO. The program provided loans with a 35% interest rate, “but it did not require submission of typical loan documentation, such as an applicant’s tax returns or payroll records”.
“For years, Sterling originated residential mortgages that were rife with fraud to pad its bottom line and then lied about these loans in its IPO and subsequent public filings, defrauding unwitting investors,” Justice Department Assistant Attorney General Kenneth Polite Jr. said in a statement.
“This proposed guilty plea reflects the nature and seriousness of the wrongdoing and demonstrates the Department of Justice’s commitment to protecting the integrity of our public markets, holding corporations accountable for their criminal misconduct, and compensating victims for their losses,” he said.
Sterling Bancorp merged into Webster Financial Corp. last year.
Total losses to non-insider-victim shareholders amounted to just under $70 million.
Negotiated as part of the plea deal, the fine will go toward paying restitution to non-insider victims. The lack of criminal charge is to ensure the company pays all it is able to the victims.
“This proposed guilty plea holds Sterling accountable for its role in defrauding non-insider victim-shareholders of millions of dollars by originating fraudulent loans through its Advantage Loan Program and filing false securities statements about the Program in its IPO and subsequent annual filings,” said Tyler Smith, acting inspector general of the Federal Deposit Insurance Corporation, in a statement.