Federal and state banking regulators chastised First Asian Bank for inept management in a letter obtained by the Review-Journal.
“The overall condition of the bank is unsatisfactory,” the Federal Deposit Insurance Corp. and Nevada Financial Institutions Division conclude in a previously confidential letter dated Aug. 5.
“Management instability and board ineffectiveness are key regulatory concerns,” the letter to board members says. “The board is clearly divided, and the ongoing disputes between board members have led to violations of laws and regulation.”
The letter also complains of “an apparent disregard for regulatory oversight, inappropriate and/or weak corporate governance practices, and critical deficiencies that jeopardize the viability of the bank.”
Robert Iwamoto, First Asian board chairman, on Wednesday first said he was waiting to obtain a copy of the regulatory letter from another board member. He later said he had seen the letter but didn’t think he should acknowledge receipt of the confidential letter.
Iwamoto said he didn’t believe the regulators’ criticism was fair.
“How (do) you argue with regulators? We just accept and do the best we can with it,” he said.
The chairman said the bank has complied with 80 percent to 85 percent of the requirements in a regulatory cease-and-desist order issued to First Asian in September. The board is preparing to appoint three new independent board members and intends to raise $3.5 million in additional capital from investors early in 2009, he said.
First Asian’s top executives were unavailable for comment Wednesday.
George Burns, commissioner of the Nevada Financial Institutions Division, said disclosing the letter violates both state and federal law. A banker who disclosed the information could be removed from the bank board or staff for releasing the letter to the public, Burns said.
A call to the Washington, D.C., headquarters of the FDIC wasn’t returned late Wednesday. FDIC field supervisor Kathy Moe declined comment.
First Asian opened for business in Las Vegas in June 2007 and now has $39 million in assets. The bank appears to be financially strong with no problem loans, but regulators have lambasted the bank’s operation and board governance.
The letter complains that the bank’s board held meetings “without inviting all directors to participate” and failed to maintain complete and accurate minutes of board meetings.
The regulators object to “micromanaging the institution by attempting to control day-to-day decisions and creating the appearance of self-serving practices.”
In addition to the criticism, the letter provides the public with a rare behind-the-scenes glimpse of bank operations.
The letter notes that the original chief financial officer and chief operating officer resigned in 2007.
In April, the FDIC and Nevada division notified First Asian representatives that it had been designated a “problem institution.”
The board established a special approval committee with authority to fire and hire the CEO, but directors Nick Mallas and John Zeigler were told they weren’t on the committee because they voted against establishing it, according to the letter.
Chief Executive William Chu orally submitted his resignation in April but changed his mind. The board refused to accept his decision to stay on, the letter states. Chu offered to stay for 90 days but “he was escorted from the bank.” The board reinstated Chu as CEO without any conditions in June.
The letter says that director and corporate secretary Patricia Barber falsely informed other directors that Moe endorsed a candidate for CEO.
Barber reviewed and monitored bank operations, according to the letter, and ordered “activities be performed according to her preference.” Director James Yu and she were reported to have called for firing certain employees.
Yet, in the absence of a CEO, Iwamoto “held few discussions” with bank examiners looking over First Asian records, the letter says. Director Rachakonda Prabhu attended less than half of regular board meetings, the letters says.
The bank board met with FDIC officials and Burns in San Francisco in June, and the findings of a regulatory examination were discussed.
None of the directors, according to the letter, made any comment about how they intended to correct First Asian’s problems.
Contact reporter John G. Edwards at email@example.com or 702-383-0420.