Sterling Bancorp to plead guilty to fraud, DOJ says

Sterling Bancorp Inc., the Michigan-based holding company for wholly owned subsidiary Sterling Bank and Trust F.S.B., has pleaded guilty to securities fraud. The Justice Department announced on Wednesday that Sterling Bancorp filed “false” securities statements regarding its 2017 initial public offering and 2018 and 2019 annual filings.

The accusation came after Sterling Bancorp was found to have originated residential mortgages that were “rife with fraud” to artificially boost its earnings. The company then allegedly misrepresented the loans in its IPO and subsequent public filings.

This misconduct was uncovered as part of a wider investigation into Sterling Bancorp by the Justice Department’s Residential Mortgage-Backed Securities (RMBS) Working Group. The group was established in the aftermath of the 2008 financial crisis and is focused on investigating fraud in the RMBS market.

In addition to pleading guilty to securities fraud, Sterling Bancorp has agreed to pay a penalty of $12 million. The company has also admitted to improperly recording expenses related to its residential mortgage program in its financial statements, and has agreed to take measures to prevent future misconduct.

The investigation into Sterling Bancorp is just one example of the Justice Department’s ongoing efforts to hold financial institutions accountable for misconduct. In recent years, the department has pursued a number of cases against banks and other companies that have engaged in fraudulent behavior or violated federal regulations.

One of the largest cases was the $13 billion settlement with JPMorgan Chase in 2013, which resolved allegations that the bank had knowingly sold risky mortgage securities to investors prior to the financial crisis, contributing to the housing collapse and subsequent recession.

Other banks, including Bank of America and Citigroup, have also faced significant penalties for their role in the RMBS market. Bank of America agreed to pay $16.65 billion in 2014 to settle allegations that it sold toxic mortgage-backed securities, while Citigroup paid $7 billion in 2014 to resolve similar claims.

These settlements reflect a growing recognition on the part of regulators and the public that financial institutions must be held accountable for their actions. The 2008 financial crisis revealed the dangers of unregulated and unchecked financial practices, and since then, both the government and the private sector have taken steps to prevent similar crises from occurring in the future.

However, there is still much work to be done to ensure that financial institutions are operating in a responsible and ethical manner. While regulations and penalties can help deter bad behavior, it is ultimately up to individual companies to establish a culture of compliance and ethics.

This requires a commitment from top-level leadership to prioritize ethics and compliance, as well as a willingness to invest in training and resources to ensure that employees understand the importance of such practices.

In the case of Sterling Bancorp, the consequences of failing to prioritize compliance and ethics are clear. The company’s misconduct has led to a significant financial penalty and lost credibility with investors and customers.

Moving forward, it will be critical for Sterling Bancorp and other financial institutions to prioritize ethical behavior and compliance with federal regulations. This will not only help ensure that the industry is operating in a responsible and transparent manner, but will also restore the trust of investors and the public in the financial system as a whole.

In conclusion, the guilty plea from Sterling Bancorp highlights the ongoing efforts by the Justice Department to hold financial institutions accountable for wrongdoing. As the fallout from the 2008 financial crisis continues to be felt, it is critical that companies prioritize ethics and compliance in order to prevent future crises and restore the trust of the public.


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