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WASHINGTON, Jan 9 (Reuters) - U.S. securities regulators on Wednesday accused three former executives at a Virginia-based bank of understating losses and masking the bank's true health at the height of the financial crisis.
The three top executives of the Norfolk-based Bank of the Commonwealth were responsible for consistent messages that it conservatively managed its portfolio of loans, which accounted for some 94 percent of the company's assets in 2008, the Securities and Exchange Commission said.
Chief executive Edward Woodard, finance chief Cynthia Sabol and executive vice president Stephen Fields knew the bank's portfolio was rapidly deteriorating yet worked to hide those problems from the earnings releases of parent company Commonwealth Bankshares Inc, the SEC said.
The bank failed in 2011 and was acquired by Southern Bank and Trust Co.
"During times of financial stress, it's more important than ever for executives to make full and honest disclosure to the investing public," Scott Friestad, associate director of the SEC's enforcement division said in a statement.
Through a complaint filed in federal court in Virginia, the agency seeks to bar the executives from serving as officers or directors of public companies and obtain penalties.
"Based on our investigation, we are convinced Ed Woodard committed no violations of the securities laws, so we are disappointed that the SEC feels it needs to take this step, but we intend to vigorously oppose" the lawsuit, said Andrew Sacks, a lawyer for Woodard.
Attorneys for the other defendants were not immediately available for comment.