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 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 unpaid balances.
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.
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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 Magnesen
said.
A lawyer for Poston did not immediately respond to a request for
comment.
The bank said on Wednesday it has about $126 billion of assets and
operates 1,320 branches in 12 U.S. states.
[By Jonathan Stempel © 2013 Thomson Reuters. All
rights reserved.] (Reporting by Jonathan Stempel in New York;
editing by Gerald E.
McCormick and Richard Chang)
Copyright 2013 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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