Eagle Bancorp in settlement talks with SEC, Fed as CFO faces penalty

The Securities and Exchange Commission has sent a notice to Eagle Bancorp Chief Financial Officer Charles Levingston signaling that it is planning to bring enforcement actions against him.

The so-called Wells notice comes as the $11 billion-asset Bethesda, Maryland, company is nearing a settlement with the SEC and the Federal Reserve to resolve investigations first disclosed two years ago into the company’s ties to former District of Columbia Councilman Jack Evans.

Evans was accused of several ethics violations in 2019, in part for his dealings with Eagle Bancorp and its former CEO and co-founder Ron Paul. Evans was allegedly hired as a consultant by the bank and pushed local legislation that would move the district’s funds into local banks like Eagle, while he owned shares in the company.

There were also ethics concerns raised with Evans’s former role as chairman of the board at the Washington Metropolitan Area Transit Authority, which was allegedly a customer of Eagle’s at the time.

Paul stepped down from his post at the helm of Eagle in 2019 citing “serious health developments.”

The SEC and Fed investigations have focused on the bank’s “identification, classification and disclosure of related party transactions” along with the retirement of former officers and directors.

Levingston has been Eagle’s CFO since 2017 and will remain in his role as he cooperates with the SEC’s investigation, CEO Susan Riel said on a call with analysts Thursday.

“While we can’t comment on the allegations against Charles, I want to stress that in making the decision to have Charles continue to serve as CFO, the board evaluated the circumstances, considered a number of factors, and consulted with members of management and external advisors, including our independent auditors,” Riel said.

Eagle reached a settlement in April to pay $7.5 million to private shareholders who brought a class-action suit against the company over allegations that it made misleading statements about its internal controls and related loans under the previous management.

Eagle hopes to resolve the SEC’s investigation “within the next few months,” Riel said.

Eagle’s legal expenses, which are categorized along with “accounting and professional fees” have come down as the company is putting the legal troubles behind it. These expenses totaled $6.5 million in the first six months of the year, down from nearly $11 million during the same period last year.

The company’s net income during the second quarter was $47.9 million, down 7.7% year over year. Eagle was able to release $4.7 million from its loan-loss reserves and booked $4.7 million in accelerated interest revenue from its sale of a batch of Paycheck Protection Program loans during the period.