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.
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