By Jonathan Stempel
Dec 4 Fifth Third Bancorp, a large U.S.
midwest regional bank, agreed to pay $6.5 million to settle U.S.
Securities and Exchange Commission charges that it accounted
improperly for troubled commercial real estate loans during the
2008 financial crisis, reducing its reported loss.
As part of the settlement, former Fifth Third Chief
Financial Officer Daniel Poston agreed to pay a $100,000 penalty
and be suspended from practicing as an accountant for any
publicly traded company, the SEC said on Wednesday.
"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."
Fifth Third in 2008 received $3.4 billion of federal bailout
money, and repaid it in early 2011.
The SEC case arose after the U.S. real estate downturn had
caused a surge in nonperforming assets at Fifth Third.
This prompted the Cincinnati-based bank to try in the third
quarter of 2008 to sell troubled loans with $1.5 billion of
But the SEC said that rather than classify these loans as
"held for sale" and value the loans at fair value, as required
under U.S. accounting rules, Fifth Third continued to classify
the loans as "held for investment."
The SEC said this allowed Fifth Third to report a $128
million pretax loss for the third quarter of 2008, less than
half the $297 million loss it should have reported.
As interim CFO at the time, Poston knew about the proposed
loan sales and accounting rules, but signed off on incorrect
financial statements and made inaccurate statements to the
bank's auditors, the SEC said.
Poston, 55, later served as permanent CFO from September
2009 to October 2013, when he became the bank's chief strategy
and administrative officer.
Fifth Third last month said the job change was made in
connection with a settlement in principle of the SEC case.
Neither the bank nor Poston admitted or denied wrongdoing in
agreeing to settle.
"We're pleased to have finalized the settlement, and are
happy to put this matter behind us," Fifth Third spokesman Larry
A lawyer for Poston did not immediately respond to a request
The bank said on Wednesday it has about $126 billion of
assets and operates 1,320 branches in 12 U.S. states.