Eagle Bancorp, Inc. (NASDAQ: EGBN)

On December 1, 2017, Aurelius Value published a report (“Eagle Bancorp’s Insider Loan Scheme Exposed”) stating that it Aurelius Value had “. . . uncovered evidence of an insider loan scheme involving [Eagle Bancorp’s] CEO and certain Board Members that [Aurelius Value] believe[s] jeopardizes the safety and soundness of the bank while potentially leading to severe regulatory penalties.  In [Aurelius Value’s] opinion, insiders treat Eagle [Bancorp] as their own private piggy bank.”

According to Aurelius Value’s report:

Eagle Bancorp is a Maryland headquartered regional bank earning outsized yields by primarily making commercial real estate and development loans.  Many investors appear to believe that Eagle [Bancorp] offers robust growth with minimal risk, a narrative that underpins the stock’s surge to all-time highs and a $2.3 [b]illion market capitalization. But Aurelius Value’s research has uncovered a pattern of conduct that [it] believe[s] is hauntingly similar to the characteristics that have preceded previous bank failures:

  • Large Insider loans that finance the CEO’s companies but haven’t been disclosed.
  • Fraud accusations that favorable loans are used to enrich the CEO and certain Board Members.
  • Undisclosed financial entanglements between largest borrowers and the CEO
  • Indications that loans to companies owned by insiders are distressed.
  • Compromised and conflicted Board oversight.
  • Large recent Insider stock sales.

Eagle’s Chairman and CEO, Ronald D. Paul, has used Eagle [Bancorp] to issue large preferential loans in exchange for being personally awarded cheap equity stakes in Eagle borrowers, according to undisclosed fraud suits filed by the founders of two businesses co-owned by Paul.  Documents show that Paul even extracted a $35 million deferred loan origination fee for himself in a transaction that simultaneously included Eagle [Bancorp] modifying the borrower’s loan. An email sent from the private accounts of Paul and Eagle’s General counsel asks for the founder of a different borrower co-owned by Paul to sign retroactive documents that are allegedly used by Paul to cover up his self-dealing from Federal Reserve examiners.

On this news, Eagle Bancorp’s (NASDAQ: EGBN) share price fell $16.20, or 24.49%, to close at $49.95 on December 1, 2017.

Kehoe Law Firm, P.C.

Kehoe Law Firm, P.C. is a multidisciplinary, plaintiff–side law firm dedicated to protecting investors and consumers from corporate fraud, negligence, and other wrongdoing. Driven by a strong and principled sense of social responsibility and obtaining justice for the aggrieved, Kehoe Law Firm, P.C. represents plaintiffs seeking to recover investment losses resulting from securities fraud, breaches of fiduciary duty, corporate wrongdoing or malfeasance, those harmed by anticompetitive practices, and consumers victimized by fraud, false claims, deception or data breaches.  Together, the partners of Kehoe Law Firm, P.C. have spent more than 30 years prosecuting precedent-setting securities and financial fraud cases in federal and state courts on behalf of institutional and individual clients.