SANTA FE, N.M. — Los Alamos National Bank and its holding company Trinity Capital Corp. have agreed to pay $1.5 million to settle accounting fraud charges, the federal Securities and Exchange Commission announced Monday.
The SEC said an investigation found that Trinity “materially misstated” losses from loans and leases in filings during 2010, 2011 and 2012.
“Trinity understated its reported 2011 net loss available to common shareholders by $30.5 million, reporting income of $4.9 million instead of a $25.6 million loss,” the SEC said. In settling, LANB and Trinity didn’t admit or deny wrongdoing.
Five current or former executives also are charged in the case. The SEC’s complaint filed in federal court alleges the fraud was directed by former longtime LANB CEO Bill Enloe, former chief credit officer Jill Cook and former senior lending officer Mark Pierce.
Enloe retired in 2013, after the bank was placed under regulatory restrictions by the federal Comptroller of the Currency for “unsafe or unsound banking practices.” Bank officials said then that Enloe’s retirement was unrelated to any relationship with federal regulators. Enloe couldn’t be reached for comment Monday, but the SEC’s news release said he agreed to pay a $250,000 penalty and to be barred from serving as an officer or director at a public company for five years.
John Gulas, CEO of both LANB and Trinity since last year, said Monday “the main reason for us settling is our willingness to cooperate” with the SEC.
“It happened a couple of years ago and everyone has been working diligently to move things forward,” Gulas said. “We don’t want to be looking in the rear-view mirror.” He said the bank has agreed to cooperate with the SEC in any other actions in the case.
The complaint also alleges that former Chief Financial Officer Daniel Bartholomew and Vice President of Internal Audit Karl Hjelvik failed to implement sufficient internal accounting controls and failed to ensure the bank’s books and records were reasonably accurate. They consented to charges and entered cooperation agreements with the SEC to assist in the litigation against the remaining defendants, Cook and Pierce.
The SEC alleges Cook and Pierce committed or aided and abetted various violations, including fraud and “lying-to-auditors.”
The SEC says LANB and Trinity’s fraudulent actions were motivated, at least in part, by the bank’s desire to be released from the supervisory agreement between the bank and the Comptroller of the Currency. “Trinity was facing dire financial straits but rather than accurately report its losses, we allege that the firm’s executives grossly misreported its income to shareholders and regulators,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement.