Law360's John Kennedy reported that a New York state jury found Abacus Federal Savings Bank not guilty of residential mortgage fraud, falsifying business records, and grand larceny charges on Thursday, a spokeswoman for Manhattan District Attorney Cyrus R. Vance Jr.'s office confirmed to the site. James C. McKinley Jr. at the New York Times also reported the jury rejected the Manhattan district attorney’s attempt to prove that the bank systematically lied for years to Fannie Mae about the qualifications of its mortgage applicants in the four month trial.
Abacus is a small bank that mostly serves New York City’s Chinese community, providing mortgages to many recent immigrants who live in a cash economy and have hidden assets, according to the bank. The bank has about $300 million in assets and is headquartered on Bowery Street in Chinatown.
Law360 reported that Yiu Wah Wong, the bank's chief credit officer, VP, and underwriting supervisor and and Wai Hung “Raymond” Tam, the loan origination supervisor were both cleared of about 80 counts each. A number of former bank employees waived their indictment and admitted their guilt and connection with the case.
“Eight people have publicly accepted criminal responsibility for their roles in this conspiracy by pleading guilty to crimes they committed while employed in Abacus Bank's loan department,” Joan Vollero, spokeswoman for Vance's office, said in a statement to Law 360. “While today's verdict is disappointing, we are confident that as a result of this prosecution and enhanced supervision by the Office of the Comptroller of the Currency, the fraud perpetrated within the loan origination department has been terminated.”
Vollero says the case began in 2010 with a complaint by an Abacus borrower to the Fifth Precinct, Law 360 reported. She says the ensuing grand jury investigation revealed widespread fraud, and when confronted with loan after loan with allegedly falsified paperwork, the grand jury voted to indict the bank and its former employees in 2012.
The investigation allegedly showed that the defendants had falsified residential mortgage documents between May 2005 and February 2010 so they could earn commissions and fees by ensuring that otherwise unqualified borrowers would receive loans, which Abacus then sold to Fannie Mae as part of an ongoing agreement, Law 360 reported.
The NY Times reported that prosecutors held on to the argument that Fannie Mae had been sold mortgages based on falsified documents, likening what the bank had done to a merchant who sells someone a product that does not meet the customer’s stated requirements.
“Fannie Mae is the victim in this case,” said Rachel Hochhauser, the lead prosecutor during her summation on May 20, the NY Times reported. “They are the victim because it was a crime to misrepresent material facts to Fannie Mae and thereby induce Fannie Mae to give the bank their money.”
The bank’s founder, Thomas Sung, told the NY Times that the office of the district attorney, Cyrus R. Vance Jr., had persecuted a community bank with a misguided prosecution. He also mentioned that legal bills had drained his family’s resources, costing more than $10 million, and restricted the bank’s business for three years.
“This entire wrongful prosecution has exhausted a small community bank such as ours,” Sung told the NY Times. “This is a gross injustice, not only to a small bank, but is casting a shadow on our community, that this community somehow condones or conducts illegal activity. This is totally prejudicial and incorrect.”