Still another assessed fine, prohibited, after involvement in troubled loan program at Michigan bank

Another individual associated with a troubled lending program at a Southfield, Mich., bank has been ordered to pay a $400,000 civil money penalty (CMP), the national bank regulator said Thursday.

The Office of the Comptroller of the Currency (OCC) said Scott Seligman was assessed the fine and prohibited from future service at financial institutions.

Seligman, the OCC said in its consent order, was not a director, titled officer or employee of Sterling Bank and Trust, FSB, of Southfield, Mich. However, the OCC said, from 2011-19, Seligman was “was a dominant influence at the Bank, issued directives to Bank officers and employees, and participated in the conduct of the affairs of the Bank.”

The OCC revealed the fine and prohibition as part of a list of enforcement actions taken in April.

The OCC alleged that Seligman, during the nine-year period, participated in the operation of the Advantage Loan Program (ALP), which the agency has described as a “low-document residential loan program … that presented high risks for fraud, money laundering, and lending misconduct and therefore required strong monitoring and controls.”

The agency alleged that Seligman and others “contributed to the Bank’s violation of (the Ability to Repay rule) because the Bank originated ALP loans without making a reasonable and good faith determination of applicants’ ability to repay the loan and did not ensure that documents used to verify applicants’ employment, income, and assets were obtained from third parties and were reasonably reliable.”

The profitability of the ALP, the OCC charged, helped support Sterling Bank’s payment of dividends – which benefited Seligman, who received a share of the dividends from the bank’s holding company. The operation of the ALP, the OCC said, also caused both potential and actual loss to Sterling Bank.

Also as part of the OCC’s action, Seligman was prohibited from future service at a federally insured financial institution (without prior approval of the OCC and regulator for the financial institution).

The action against Seligman is the latest in a string of fines and prohibitions assessed against former executives of the bank and associated with the ALP. Since 2022, at least four others have been fined and prohibited for their actions regarding the ALP at Sterling Bank.

OCC Announces Enforcement Actions for April 2024