A judge has fined BBX Capital and its CEO $5.85 million after a jury found the Fort Lauderdale company misled investors about loan losses during the 2007 financial meltdown.
U.S. District Judge Darrin Gayles in Miami also barred CEO and Chairman Alan Levan from serving as an executive or board member of any publicly traded company for two years.
In a suit filed by the Securities and Exchange Commission, jurors found in December that Levan and BBX Capital, operating at the time as BankAtlantic Corp., fraudulently misled investors by failing to fully disclose weaknesses in the bank’s loan portfolio.
The bank also engaged in improper accounting treatment in the months leading up to the real estate crash and banking crisis, the SEC alleged.
“Levan’s actions were egregious,” the judge said at a court hearing Thursday. “He purposely misled investors and shareholders regarding the health of BankAtlantic. These weren’t isolated events.”
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
Levan and BBX deny any wrongdoing and point out that the jury cleared them on several counts.
In a written statement in December, BBX said Levan told investors what he thought was accurate at the time. Both the company and Levan disputed a judge’s instruction to the jury that three sentences Levan spoke in a conference call with investors were “objectively false.”
“I provided a candid view of what I believed faced the company. … BBX was one of the first companies to recognize the severity of the housing market crash and accept the losses most others ignored for many months. If this part of the verdict is allowed to stand, no officer of any public company could ever again safely participate in earnings conference calls,” Levan said in a statement.
The SEC had sought a lifetime ban on Levan from leading publicly traded companies. Gayles agreed to a delay of 90 days on Levan’s bar order to give him a chance to appeal.
On Thursday, BBX Capital said Levan would resign if an appeal is unsuccessful. He has been chairman and CEO since 1994. He has been chairman, CEO and president of BFC Financial Corp., BBX’s holding company, since 1978.
“Obviously I’m very disappointed with the judge’s ruling, but I respect our judicial system,” Levan said in a statement. “The fact that I respectfully disagree with the court’s finding does not mean that I do not believe in the rule of law.
“I take the allegations in this case and my responsibilities as a CEO very seriously. But, in this country, we have the right to disagree and to pursue our right to appeal the court’s decision.”
Information from Bloomberg News was used in this report.
