‘We cooperated with them, not realizing we were the target,” said Vera Sung, a director of Abacus Federal Savings Bank, about the bank’s interactions with prosecutors at the start of a two-and-a-half year investigation that led to the bank’s indictment, trial, and finally, acquittal this past June.1 The prosecution, led by the Manhattan DA’s office, has been variously assailed as a political expediency, the persecution of a minority-owned bank, and a misplaced use of post-financial crisis investigative resources. But it also serves as a cautionary tale about the lurking dangers of self-reporting and cooperation without the assistance of counsel and the importance of always considering potential liability.
Abacus Federal Savings Bank was founded in New York City’s Chinatown in 1984. In May 2012, it became the first and only bank to be indicted for mortgage fraud in the wake of the 2008 financial crisis. The case began with a routine real estate closing at the bank’s Chinatown branch on a Friday in December 2009. When the borrower started asking about extra checks she had written for the loan officer, Vera Sung grew suspicious and called off the closing. The bank investigated, and terminated the loan officer the following Monday. The loan officer later pleaded guilty to grand larceny, fraud, and falsifying business records; he apparently was taking kickbacks for falsifying mortgage applications.2
