01/18/2012 06:53 pm ET Updated Mar 19, 2012

Alan Levan, BankAtlantic CEO, Charged With Fraud By The SEC

* Securities fraud, accounting fraud alleged

* BankAtlantic had accused banking analyst of defamation

* Banking operations being sold to BB&T

* BankAtlantic, CEO plan to defend against charges (Adds comments from BankAtlantic and its lawyer)

By Jonathan Stempel

Jan 18 (Reuters) - BankAtlantic Bancorp Inc, a large Florida bank that once sued an industry analyst for defamation, and its chief executive were charged by a U.S. regulator with defrauding investors as problems mounted in a commercial real estate portfolio tied to residential housing.

Wednesday's civil lawsuit by the U.S. Securities and Exchange Commission prompted a combative response by Alan Levan, BankAtlantic's chairman and chief executive, who said that when the case is over, "the SEC's credibility as a neutral enforcer of securities laws will be tarnished."

The case arose from BankAtlantic loans made on large tracts of land intended for the development of single-family homes and condominiums. Florida is among the U.S. states hardest hit by the nation's housing crisis.

According to the regulator, BankAtlantic and Levan knew many loans were in "serious jeopardy" by March 2007, but minimized the risks in public filings and earnings conference calls, and waited until October to reveal the depth of the problem. That disclosure prompted a 38 percent one-day decline in BankAtlantic's share price.

The SEC said BankAtlantic and Levan then failed to properly account for problem loans it tried to sell as being "held for sale," as part of a scheme to understate the bank's 2007 loss by more than 10 percent.

"This is exactly the type of information that is important to investors, and corporate executives who fail to make that required disclosure will face severe consequences," SEC enforcement chief Robert Khuzami said in a statement.


The SEC accused the defendants of securities and accounting fraud. It is seeking financial penalties from both, and to ban Levan, 66, from serving as an officer or director of a public company. The lawsuit was filed with the federal court in BankAtlantic's hometown of Fort Lauderdale, Florida.

Eugene Stearns, a lawyer for BankAtlantic and Levan, in a phone interview said the disclosures by his clients were proper, and that they plan to seek a dismissal of the case.

"I think we all feel terribly for the SEC," Stearns said. "We all know there is tremendous pressure, and it has to sue somebody because of the collapse of the banking system. It is unfortunate they picked the wrong city and the wrong people to claim about."

BankAtlantic in November agreed to sell its primary banking operations to Winston-Salem, North Carolina-based BB&T Corp . No obligations of the holding company were being assumed in the transaction, a regulatory filing shows.

BB&T was not immediately available for comment.


The lawsuit came more than three years after BankAtlantic sued prominent banking analyst Richard Bove over a report ranking the bank within the bottom 20 percent of more than 100 banking companies on two financial ratios.

That report was titled "Who Is Next?" and published in July 2008, two days after the failure of mortgage specialist IndyMac Bancorp Inc.

Levan said at the time that "no one would ever conclude that BankAtlantic belongs to any list of 'next.'"

BankAtlantic and Bove eventually settled the case.

Bove, who now works at Rochdale Securities and does not now rate BankAtlantic, in a phone interview said the SEC could have acted sooner.

"In my view, the SEC should have moved much more aggressively in 2007, before the lawsuit against me was filed and analysts started dropping coverage of the company, and taken a much closer look at what was going on," he said. "A lot of investors could have avoided losing a lot of money had the SEC gotten involved when it was supposed to."

BankAtlantic shares closed Wednesday down 25 cents at $3.03. They have lost more than 97 percent of their value since October 2007, Reuters data show. The SEC announced the charges shortly before U.S. markets closed.

The case is SEC v. BankAtlantic Bancorp Inc et al, U.S. District Court, Southern District of Florida, No. 12-60082. (Reporting By Jonathan Stempel; Additional reporting by Sarah N. Lynch in Washington D.C. and Rick Rothacker in Charlotte, North Carolina; Editing by Bernard Orr)