Banking
Jul. 31, 2002
Jury Finds Bank Guilty of Fraud
SAN FRANCISCO - A Superior Court jury has socked a large commercial bank with a $9 million fraud verdict that could signal a new willingness by jurors to punish bad-behaving executives, according to plaintiffs lawyers.
United Commercial Bank, which serves California's Chinese population, deceived another bank, Far East National Bank, regarding a multimillion-dollar loan, the jury found.
Jurors said the deceit amounted to fraud, and plaintiffs lawyers said their verdict might signal changing attitudes about corporate misdeeds.
Robert O'Brien, a partner with Friedemann O'Brien Goldberg & Zarian in Los Angeles who represented the plaintiffs, said he's not willing to declare it a new trend, because there haven't been enough jury trials or settlements since the Global Crossing and Enron collapses. Still, he said, jurors seem to be more aware that executive ranks include "a few bad apples."
That attitude was particularly evident in this case, he said, as jurors rarely find banks liable for fraud.
"We put our money in banks and rely on them as conservative institutions," he said. "We trust them. Here a bank manipulated paper to make a loan look better than it really is, and I think that that resonated with a jury."
According to the complaint, UCB loaned about $2.2 million to a South El Monte company called Top 1 International Trading and Investment Co., which traded motorcycle and personal computer parts in the United States and Asia.
According to Far East's attorneys, the loans were secured by accounts receivable documents. But UCB let Top 1 swap more recent documents for old ones, keeping the company from defaulting without ever paying off the loan. Notwithstanding its failure to pay, UCB renewed Top 1's credit line but told the company to find another bank to take over the loan. UCB never revealed these arrangements to Far East when that bank assumed the loan. As a result, Far East claimed, it was tricked into loaning money to Top 1 that was then used to pay off UCB.
San Francisco Superior Judge David Ballati presided over the seven-week jury trial. Jurors ultimately found that UCB made intentional misrepresentations regarding the loan with the intent of depriving Far East of its money. They assessed $3 million in compensatory damages Thursday and added $6 million in punitive damages Friday. Far East National Bank v. United Commercial Bank, 315690.
UCB was represented at trial by Coudert Brothers. Lawyers there said they are considering all options, including an appeal. They noted that Ballati still must render a verdict on unjust enrichment and unfair competition claims.
"We strongly believe the evidence presented does not justify the decision," said Coudert partner William Hebert. "The evidence we presented to the jury clearly demonstrated that United Commercial Bank provided Far East National Bank with all the information requested by Far East."
Tyler Cunningham
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