Former Mercantile execs settle with SEC in fraud lawsuit
Wed, 25 Sep 2013 15:24:51 GMT —
A federal bankruptcy judge ruled that the sale of Mercantile Bank can proceed.
In an order released Wednesday, U.S. Bankruptcy Judge Kevin J. Carey authorized the the sale of Mercantile Bancorp, Inc.'s shares in Mercantile Bank and the related trademark for the bank's "M" Logo free of all liens, claims and encumbrances.
In June, Mercantile sought bankruptcy protection with an agreement to sell all of its assets to UCB for about $22.3 billion.
The Quincy-based bank listed a debt of more than $50 million and assets less than that when it filed for Chapter 11 bankruptcy.
UCB's headquarters is located in Chatham, Ill.
â??We cannot wait to officially join the UCB bank family," Mercantile Bank president and chief executive officer H. Blaine Strock said. "Once the sale is completed, our partnership with UCBâ??s banks will bring all of our customers more banking options and enhanced services from the bank they have trusted for more than a century."
The news comes just a day after the Securities and Exchange Commission permanently barred the former heads of Mercantile Bancorp from serving as directors of publicly traded companies.
The ban is part of a resolution of a complaint filed by the SEC against former chief executive officer Ted Awerkamp and former chief financial officer Michael McGrath.
Each agreed to settle the complaint that accused them of fraud. Both agreed to pay a $100,000 fine in addition to the ban.
The SEC's lawsuit filed in the U.S. District Court Central District of Illinois says that Awerkamp and McGrath reported that the bank earned $1.8 million in net income for three quarters of 2010 when it actually lost $3.5 million.
Two men knew that one of the bank's largest loan holders was unable to complete the Banning Lewis Ranch real estate development in Colorado Springs, Colo. The 20-page SEC lawsuit called the loan one of the bank's â??largest problem loans.â??
â??Like many other real estate projects, Banning Lewis did not perform well during the financial crisis,â?? the complaint says.
With that knowledge, Awerkamp and McGrath didn't report the loss.
"Before a Mercantile Bank Board meeting in late August 2010, Awerkamp and McGrath were aware of the March 2010 appraisal ... and the FDIC's expectation that Mercantile recognize the $5.28 million loss,â?? the lawsuit says.
Awerkamp and McGrath's consent agreements allow them to settle the dispute without admitting or denying the allegations levied by the SEC.
Mercantile Bancorp Inc., the bank's parent company, also reached an agreement with the SEC.
Awerkamp is now the chief operating officer of First Capital Bank of Texas, a privately held bank in Amarillo, Texas.
McGrath is the manager of accounting at Quincy Newspapers Inc.