The chief executive of the company once known as BankAtlantic Bancorp Inc. was barred from serving as an executive or board member of any publicly traded company for two years, punishment after a jury’s fraud verdict against him.
The Securities and Exchange Commission, which sued CEO Alan Levan and the bank in 2012, had sought a lifetime ban. U.S. District Judge Darrin Gayles in Miami also ordered BBX Capital Corp., as the firm is now known, and Levan to pay fines totaling $5,850,000. Gayles agreed to a delay of 90 days on Levan’s bar order to give him a chance to appeal.
Jurors found in December that BBX Capital and Levan fraudulently misled investors by failing to fully disclose weaknesses in the bank’s loan portfolio, and by engaging in improper accounting treatment in the months leading up to the real estate crash and banking crisis.
“Levan’s actions were egregious,” Gayles said at a court hearing Thursday. “He purposely misled investors and shareholders regarding the health of BankAtlantic. These weren’t isolated events.”
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SEC attorney Russell Koonin told Gayles that “Levan engaged in a massive fraud to mislead shareholders.”
“Levan ran that bank like Bank Levan,” ’Koonin said. “The problem is this is a publicly traded company, not a warehouse, not a home-goods store down the street.”
Eugene Stearns, an attorney for BBX and Levan, urged the judge to deny the SEC’s request for a bar order, arguing the jury had only found a “minor” violation of law.
Gayles ordered Levan to pay $1.3 million of the fine and BBX to pay $4.55 million
The case resembled a shareholder class action filed against Levan and BankAtlantic that went to trial in 2010. While shareholders won a jury verdict, the judge later ruled there wasn’t sufficient evidence against Levan or the bank, and threw it out.
The SEC said in its complaint that Levan knew a large portion of the portfolio, which consisted mainly of loans on land intended for development into single-family housing and condominiums, was worsening in early 2007 as borrowers struggled to make payments.
In the first two quarters of 2007, BankAtlantic made only general warnings about risks related to Florida’s real estate market and failed to disclose the downward trend already occurring in its portfolio, according to the regulator.
The jury found Levan and BBX “engaged in a course of business that operated as a fraud throughout 2007.” BBX failed to properly disclose about $53 million in losses, the SEC said during the six-week trial.
The SEC said the bank acknowledged the problem in the third quarter of 2007 by announcing a large loss, which caused its stock to plunge 37 percent.