SEC goes after 11 former bankers in Alabama failure

Six former officers and directors of a failed Alabama bank will pay fines totaling $1 million after the Securities and Exchange Commission accused 11 bankers at the institution of misleading investors during the financial crisis.

The SEC charged the officers and directors with fraud as part of an investigation of the 2011 failure of Birmingham-based Superior Bank.

With this week's announcement, the SEC apparently has increased its focus on going after individual executives and directors that it alleged contributed to the failures of financial institutions during and after the 2007-2009 financial crisis.

The Superior Bank complaint accounts for more than a third of the bank executives and directors the SEC has named in nine complaints against banks since 2010.

Last year, the agency also expanded a 2014 compliant against Wilmington Trust in Delaware to accuse four former executives at the institution of wrong-doing.

Industry insiders say the SEC has been less active than the Federal Deposit Insurance Corp. in filing complaints against former bank executives and directors.

In Georgia alone, the FDIC has sued bankers at 26 Georgia institutions for allegedly unsafe banking practices that contributed to their collapses during the crisis, said Robert Klingler, partner at the Bryan Cave law firm, which often represents banks in such cases. The FDIC insures depositors’ accounts against such bank failures.

“The FDIC is going to be the first party to sue. Shareholders (of banks) are going to be next,” said Klingler.

He said the SEC has filed fewer complaints against banks partly because many were small community institutions that didn’t have publicly-traded stocks. The agency regulates publicly traded companies.

Superior Bank, which had operations in Alabama and Florida, was the largest bank failure in 2011, according to the SEC’s complaint, costing the FDIC more than $320 million.

The federal government likewise lost almost $72 million in bailout funds Superior Bank received during the Great Recession, the SEC said.

In the settlement this week, six of Superior Bank’s former bankers, including a former chief executive, agreed to pay $1 million in total fines. A federal district court in Tallahassee, Fla., will set fines for three others.

The two remaining former bankers charged by the SEC have not reached settlements.