Ex-Bank of the Commonwealth CFO to settle with SEC

By Scott Daugherty | The Virginian-Pilot | March 11, 2015 12:00 AM

NORFOLK

The former chief financial officer for now-defunct Bank of the Commonwealth wants to settle a Securities and Exchange Commission complaint filed two years ago regarding her handling of the books leading up to the bank’s collapse, according to court documents.

Cynthia A. Sabol – who has not been charged with a crime – has agreed to pay a $55,000 fine, to not serve as an officer or director in a publicly traded company for the next five years and to not violate securities law in the future.

Under the settlement, Sabol, 51, of Virginia Beach, neither admits nor denies the SEC’s allegations. U.S. District Judge Mark Davis must sign off on the agreement.

“Ms. Sabol settled at this time to obtain finality,” said Mark Krudys, her attorney. He declined to comment further.

“We believe that this proposed settlement is a fair and appropriate resolution of the litigation,” said Scott Friestad, associate director of the SEC’s division of enforcement.

According to court documents, Sabol was the target of a federal criminal investigation separate from the SEC’s civil action. Prosecutors and Krudys declined to comment on the status of the investigation.

Former bank Chairman and CEO Edward J. Woodard Jr. and former Executive Vice President Stephen G. Fields – both of whom are serving lengthy prison sentences – were named in the same SEC complaint as Sabol.

Both men settled earlier in the civil proceedings, with each agreeing never to serve as an officer or director of a publicly traded company or otherwise violate securities law.

State and federal regulators shut down Bank of the Commonwealth in September 2011 amid mounting losses. The bank’s failure cost the FDIC’s Deposit Insurance Fund more than $308 million.

The crux of the SEC’s complaint – like the criminal case – was the bank’s relationship with developers Eric Menden and George Hranowskyj and business owner Tommy Arney.

The bank loaned Menden and Hranowskyj $32 million for redevelopment projects. The SEC’s case centered on the renovation of the James Madison Hotel on Granby Street downtown.

The SEC claimed Woodard and Sabol ignored warnings from consultants that those loans were problems because the developers had not been making payments on time. The agency also claimed the two hid those problems in their reports and lied to external auditors.

The SEC initially asked the court to bar Sabol from working as an officer or director in a publicly traded company.

Woodard’s son, Troy Brandon Woodard, who worked for a mortgage subsidiary of the bank, and customer Dwight Etheridge were also convicted and sent to prison for their roles in the conspiracy. They were not named in the SEC action.

Scott Daugherty, 757-446-2343, scott.daugherty@pilotonline.com

See Original Article Here.