WASHINGTON — Boston-based OneUnited Bank skipped its sixth consecutive dividend payment to the U.S. government, making it just one of a handful to have fallen so far behind, the company's chief executive said in an interview.
The payment was due Tuesday and stems from the $12.1 million in taxpayer money OneUnited received in 2008 under the Troubled Asset Relief Program.
OneUnited is under intense scrutiny because of its central role in an ethics controversy relating to Rep. Maxine Waters, D-Calif., who has been accused by a House ethics committee of helping the bank secure taxpayer money when her husband was an investor. She has denied wrongdoing and has disputed the accusations.
In addition, OneUnited CEO Kevin Cohee has drawn attention in recent days following reports he was arrested in connection with drug and sexual-assault charges several years ago. The charges were dropped and he has denied any wrongdoing. Richard Carr, a director at the bank, said in an interview the board has confidence in Cohee.
OneUnited describes itself on its website as "the first black-owned internet bank," and has operations in Massachusetts, Florida, and California. The bank has faced criticism from regulators for financing a Porsche and expensive California home for Cohee several years ago, and the company has been under strict regulatory scrutiny ever since. It qualified for $12.1 million in Tarp funds even though its financial condition was uncertain because of losses tied to the housing giants Fannie Mae and Freddie Mac.
Because OneUnited has missed six consecutive dividend payments, the Treasury Department could move to place directors on OneUnited's board of directors. Cohee said in an interview he would welcome such a move, but he also spoke confidently of the bank's financial condition. He said it brings in between $500,000 and $1 million in deposits each day and that it would eventually pay back the government's investment in full.
In separate interviews, Cohee and Carr gave different reasons for why the bank didn't meet its dividend payment.
Cohee said the Tarp investment was being used to create jobs. "Companies that have the best prospects for the future most often don't pay dividends, and the reason they do not pay dividends is because they can deploy the capital in higher return opportunities than the shareholders can," he said.
Carr, a Massachusetts dentist, said the decision was partly driven by concerns from regulators such as the Federal Deposit Insurance Corp. "With the Tarp payments, the FDIC advised you not to pay those payments if your capital isn't up to snuff," Carr said in an interview. "They would be disappointed in us if we made a decision that wasn't in the best interest of the bank."
The bank's Tier 1 capital level, a measure of its health, was just 4.6% at the end of June, suggesting it is weaker than many other banks. Cohee said he was confident the firm would soon raise capital from private-equity investors to shore up its financial condition.
"We have no capital problems," Cohee said. "Right now we're in a position where we're going to raise tens of millions of dollars."
Nine banks receiving a combined $398.5 million in Tarp funds have missed five or six dividend payments, not including the most recent August payments, according to the Treasury Department. Under Tarp's rules, Treasury officials can place directors on the boards of banks that miss six payments, which would now include OneUnited. Treasury officials didn't have an immediate comment.
Hundreds of U.S. banks received Tarp money in late 2008 and early 2009 as part of a controversial government program to inject capital into the banking sector and stabilize financial markets. Many banks have moved to pay the money back as the economy improved and also following complaints about rules added later in areas such as executive compensation.
Cohee said his bank might repay its Tarp investment if it comes under public pressure to do so. "If it just becomes too volatile we'll just have to give it back," he said.