The Securities and Exchange Commission said Wednesday that it had settled with Fifth Third Bancorp and its former chief financial officer, Daniel Poston, in a case involving improper accounting for soured mortgages around the time of the financial crisis.
Fifth Third has agreed to pay $6.5 million to settle charges that the company improperly accounted for its commercial real estate loans in 2008. The error allowed Fifth Third to avoid a 132 percent increase in the company’s pretax loss in one quarter, but the S.E.C in its announcement did not accuse the bank of deliberately making an error.
Mr. Poston has agreed to pay a $100,000 penalty, and will be suspended from working as an accountant at any public company for at least one year. Neither Mr. Poston nor the bank admitted or denied any wrongdoing.
Fifth Third, a bank holding company based in Cincinnati, disclosed last month that it was in settlement talks with the S.E.C. That filing also said that Mr. Poston had moved to a strategy and administration role in the company, and that its former treasurer, Tayfun Tuzun, had succeeded him as chief financial officer.
“We’re pleased to have now finalized that settlement and to put this matter behind us,” a spokesman for Fifth Third said, adding that Mr. Poston would not be available for comment. Mr. Poston will be able to apply for reinstatement as an accountant in one year.
The bank experienced a surge in “nonperforming assets” as the real estate market declined in the lead-up to the 2008 economic collapse, according to the S.E.C. Fifth Third eventually decided to sell off chunks of its mortgages, but categorized them incorrectly as “held for investment” instead of “held for sale,” according to the agency.
The S.E.C. contended that Mr. Poston was familiar enough with accounting rules and should have directed the bank to classify its loans correctly. The agency also said that the executive made inaccurate statements to the company’s auditors.
“Improper accounting by Fifth Third and Poston misled investors during a time of significant upheaval and financial distress for the company,” George S. Canellos, co-director of the S.E.C.’s enforcement division, said in a statement on Wednesday that announced the deal. “It is important for investors to know the financial consequences of decisions made by management, so accounting rules that depend on management’s intent must be scrupulously observed.”
Mr. Poston will become the 68th executive to be charged by the S.E.C. with misconduct during the financial crisis, though many of them have been at smaller firms or mortgage providers.