Sterling Bancorp to Pay $12.5 Million to Settle Securities Lawsuit

Sterling Bancorp has agreed to pay $12.5 million to settle a securities class action lawsuit filed by the Oklahoma Police Pension and Retirement System (OPPRS) that alleged the bank violated federal securities laws related to disclosures of its residential lending practices.

“This settlement should put to rest one of several difficult matters that arose out of our former Advantage Loan Program,” Sterling Bancorp CEO Thomas O’Brien said in a statement.

Attorneys for the Oklahoma Police Pension and Retirement System argued that the bank made “untrue statements of material fact” related to its now defunct Advantage Loan Program. They also alleged that the bank “omitted other facts that were necessary to make the statements not misleading” and failed to disclose material facts concerning the bank’s loan underwriting, risk management, and internal controls, including “repeatedly touting its Advantage Loan Program.”

In June 2019, Sterling Bancorp, which is the thrift holding company of Sterling Bank and Trust, disclosed in a Securities and Exchange Commission (SEC) filing that director Jon Fox, who served on the bank’s audit and risk management committee, had suddenly resigned from Sterling’s board. According to the lawsuit, the company tried to “temper the news” in the filing by stating that Fox’s resignation “was not due to any disagreement on any matter relating to the company’s operations, policies, or practices.” The lawsuit said the company’s stock price fell on the news of the resignation to $9.90 per share on June 24, 2019, from $10.06 per share on June 21, 2019.

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In another SEC filing submitted in early December 2019, Sterling Bancorp said that it voluntarily and temporarily suspended its Advantage Loan program in connection with an ongoing internal review of the program’s documentation.

“Management believes it is prudent to temporarily halt the program as it continues to audit documentation on past loans and puts in place additional systems and controls,” Sterling Bancorp said in the filing. “It is the company’s intention to resume the Advantage Loan Program as soon as management is confident its stated policies and procedures are being followed.”

On this news, the lawsuit said Sterling shares fell to $7.29 on Dec. 9, 2019, a drop of $2.16 or nearly 23% on heavy volume, from a close of $9.45 on Dec. 6, 2019.

In exchange for the single cash payment of $12.5 million, the bank is released of all alleged claims and remains subject to court approval and other conditions.

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Tags: Lawsuits, Oklahoma Police Pension & Retirement System, residential lending practices, securities class action, Settlement, Sterling Bancorp, Sterling Bank and Trust, Thomas O’Brien

Edwin Denson

Economist Edwin Denson has been named as the next executive director and chief investment officer for the State of Wisconsin Investment Board (SWIB). Denson, who has overseen risk management and investment strategies at the fund, succeeds David Villa, who died in February.

“SWIB is fortunate to have someone with Edwin’s talent and experience, who is ready to take on this leadership role,” said David Stein, chair of the independent SWIB Board of Trustees, in a statement. “He combines a deep understanding of SWIB’s innovative investment strategy with a wealth of expertise in both public and private sector asset management.”

SWIB manages more than $143 billion, including the fully funded Wisconsin Retirement System (WRS).

Villa joined SWIB in 2006 as CIO, and was named executive director in 2018, when he was also named to CIO Magazine’s Power 100. Under Villa’s stewardship, SWIB said its internal management grew from 21% of assets to more than 50% of assets.

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He added $1.9 billion to the state’s retirement system above its performance benchmarks over the past five years. WRS reported preliminary 2020 net returns of 15.21%, with five- and 10-year annualized returns of 10.74% and 8.51%, respectively. It outperformed its benchmarks for all periods.

Denson, who joined SWIB in 2018, said in a statement, “I felt lucky to have known David for almost 20 years and to have worked closely with him again over the last few.”

A veteran investment officer who previously worked at the $475 billion Canada Pension Plan Investment Board (CPPIB), he added, “Now, I am eager to build on his vision, strategy, and direction for the agency as we continue to create a world-class investment management organization.”

At SWIB, Denson has served as the managing director of asset and risk allocation (ARA), responsible for risk analysis, allocation and oversight, asset allocation, passive portfolio and leverage implementation, macroeconomic analysis, and fund-level investment strategies. He also serves on SWIB’s Management Council. During his time at SWIB, he has more than doubled the ARA staff to build out innovative investment strategies for the pension program.

Before joining SWIB, he was a managing director and head of strategic tilting at the CPPIB, which he joined in 2013. There, he and his team drove one of the three primary sources of investment return. Before that, Denson spent 13 years in asset allocation, currency, and risk management as a portfolio manager at William Blair, was a managing member at Singer Partners LLC, and was a managing director and head of asset allocation at UBS Global Asset Management.

Earlier in his career, Denson was an economist at Lehman Brothers, Primark Decision Economics, and Putnam Investments, and he also briefly managed a commodity trading adviser and a quantitative equity strategy.

Denson holds a bachelor’s degree in economics from Cornell University and a Ph.D. in economics from Northwestern University, specializing in macroeconomics and econometrics.