.
Immediate Release
July 31, 2002
FAR EAST NATIONAL BANK AWARDED $9 MILLION BY SAN FRANCISCO JURY
Los Angeles, CA, July 31, 2002 - After a seven week-long trial, a San Francisco Superior Court jury returned a $3 million compensatory damages verdict on July 25 in a fraud lawsuit brought by Far East National Bank ("FENB") against United Commercial Bank ("UCB"). (Far East National Bank v. United Commercial Bank, San Francisco Superior Court, Case No. 315690.) UCB is a wholly owned subsidiary of UCBH Holdings, a NASDAQ listed company. The jury found that UCB knowingly made false representations to FENB in connection with a $3 million loan made by FENB to Top 1 International Trading and Investment Co., Inc. ("Top 1") in October 1998. Moreover, because the jury found that there was clear and convincing evidence of UCB's fraud, it awarded FENB punitive damages against UCB in the amount of $6 million.
FENB lead counsel in the case, John Friedemann a partner in the Santa Rosa office of FRIEDEMANN, O'BRIEN, GOLDBERG & ZARIAN LLP, stated that "he was very pleased with the jury's verdict and believes that FENB's rights have been vindicated." Also representing FENB at the trial was Kyle Fisher, counsel to the firm. UCB was represented by the San Francisco office of the New York law firm of Coudert Brothers. The case was presided over by Judge David L. Ballati.
According to the complaint filed in the case, Top 1 was an international wholesale trading company located in South El Monte, California. Top 1 claimed to be involved in the sale of goods such as motorcycle parts and personal computer components to buyers in Hong Kong, Singapore and Malaysia as well as in the United States. In or about March 1997, UCB and Top 1 entered into an "accounts receivable financing" loan relationship. Ultimately, UCB loaned $2.2 million against the security of accounts receivable documents.
During the loan relationship between UCB and Top 1, UCB began releasing accounts receivable documents to Top 1 under a practice referred to by UCB as "free of payment" in order to keep the loan from defaulting. Specifically, UCB adopted a practice whereby Top 1 was allowed to submit new accounts receivable documents as collateral, even though payment had never been received by UCB for old accounts receivable documents. As such, the loan would appear to be current and sufficiently secured by recently submitted accounts receivable, even though Top 1 was not making regular payments on the line of credit. Notwithstanding the foregoing, in August, 1998, UCB renewed Top 1's line of credit in the amount of $2.2 million. Top 1 was told by senior officers of UCB to find another bank to take over the UCB loan and pay UCB back the money it had lent to Top 1.
On October 5, 1998, FENB put UCB on notice by letter that it was preparing to enter into an "accounts receivable financing" relationship with Top 1. FENB advised that the accounts receivable documents under collection through UCB would be used to secure the line of credit to be advanced by FENB to Top 1. FENB requested a list of the accounts receivable documents currently under collection through UCB. The funding of the FENB loan was contingent upon UCB's agreement to remit to FENB all proceeds from the collection of the accounts receivable documents in UCB's possession. FENB was not aware that UCB had not collected on accounts receivable documents of Top 1 in many months and FENB was not aware that throughout 1998, UCB had been swapping new accounts receivable documents for old accounts receivable documents.
In an October 7, 1998 letter to FENB, UCB failed to advise FENB that Top 1 had been allowed to submit new accounts receivable documents as collateral to replace old accounts receivable documents. UCB provided a list of accounts receivable purportedly under collection. As the result, FENB was induced by UCB to advance money on its line of credit to Top 1 to pay off the UCB line of credit to obtain a first security position in valueless accounts receivable documents.
The jury found that UCB made intentional misrepresentations regarding the Top 1 loan with the intention of depriving Far East of its money.
Far East National
Bank Contact:
Kenny Hsu
(213) 687-1349
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