U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23367 / September 28, 2015
Securities and Exchange Commission v. Jill D. Cook and Mark C. Pierce, Civil Action No. 15-cv-00864 (D.N.M., filed September 28, 2015)
SEC Charges Trinity Capital Corporation and Former Bank Executives with Accounting Fraud
The Securities and Exchange Commission (the “Commission”) today announced that Trinity Capital Corporation and its wholly-owned subsidiary, Los Alamos National Bank, have agreed to pay $1.5 million to settle accounting fraud charges.
An SEC investigation found that Trinity materially misstated its provision for loan losses and its allowance for loan and lease losses in its quarterly and annual filings with the Commission during 2010, 2011, and the first two quarters of 2012. Specifically, Trinity understated its reported 2011 net loss available to common shareholders by $30.5 million, reporting income of $4.9 million instead of a $25.6 million loss.
Five current or former executives also are charged in the case that involves fraudulent manipulation of the company’s financial results and failure to implement sufficient internal accounting controls over loan accounting.
As alleged in the SEC’s complaint, the fraud was directed by Trinity’s former Chief Executive Officer William Enloe, former Chief Credit Officer Jill Cook, and former Senior Lending Officer Mark Pierce. The complaint also alleges that former Chief Financial Officer Daniel Bartholomew and the Vice President of Internal Audit Karl Hjelvik failed to implement sufficient internal accounting controls and failed to ensure the bank’s books and records were reasonably accurate. The alleged fraud was motivated, at least in part, by the bank’s desire to be released from a formal supervisory agreement between the bank and the Office of the Comptroller of the Currency, the bank’s primary regulator.
Trinity, Enloe, Bartholomew, and Hjelvik agreed to settle the SEC’s charges, while the litigation continues against Cook and Pierce.
According to the SEC’s complaint filed in federal court in Albuquerque, New Mexico, and the settled administrative proceedings:
Trinity and Enloe consented to an order to cease and desist from violating the antifraud, reporting, books and records, and internal controls provisions of the federal securities laws. Without admitting or denying the SEC’s findings, Trinity agreed to provide ongoing cooperation and to pay a $1.5 million penalty, which takes into account the company’s significant remedial measures and cooperation during the investigation. Enloe agreed to pay a $250,000 penalty and also agreed to be barred from serving as an officer or director at a public company for five years. Bartholomew and Hjelvik consented to charges of books and records, reporting, and internal control violations, and entered into cooperation agreements with the SEC to assist in the litigation against Cook and Pierce.
The Commission’s complaint filed against Cook and Pierce alleges they: (i) violated, or in the alternative aided and abetted Trinity’s violations of, Section 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rules 10b-5(a) and (c) thereunder; (ii) violated Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder; (iii) aided and abetted Trinity’s violations of Sections 17(a)(2) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-1, and 13a-13 thereunder. The Commission’s complaint seeks a final judgment permanently enjoining them from violating the provisions set forth above, officer and director bars, and civil penalties.
The Commission’s investigation was conducted by Matthew L. Skidmore, Michael F. D’Angelo, and Mary S. Brady, and was supervised by Thomas J. Krysa. The litigation will be led by Polly A. Atkinson and Gregory Kasper.