November 13, 2017 – This documentary tells the David and Goliath story of a multimillion dollar criminal trial of a small bank in New York's Chinatown that had nothing to do with the financial crisis of 2008, seemingly picked on by prosecutors because it appeared to be small and powerless.
At the same time the Abacus Federal Savings Bank, which caters to Chinese Americans, was being prosecuted, the big banks got off Scott free. The big banks, whose misdeeds during the mortgage crisis nearly collapsed the world's financial systems, were not only let off the hook legally, they were bailed out by taxpayers. That is the background which hangs over this story about how a small bank took on the government and won.
This is mainly the story of one family, headed up by Thomas Sung, a lawyer who founded the bank in 1984. His three daughters, also lawyers, banded together to fight the prosecution brought by the Manhattan District Attorney's office in 2012. The bank and 19 of its employees were indicted on charges of fraud in relation to hundreds of millions of dollars worth of mortgages the bank sold to Fannie Mae between 2005 and 2010.
The documentary film, directed by Steve James of “Hoop Dreams” makes a strong case that this was an ill-advised prosecution, but it is not a black and white case, either, it is complicated. Still, the film gives the impression that if prosecutors wanted to make an example of bank wrongdoing, there were far better and far more important targets at which to aim. This was the only bank prosecuted for the mortgage crisis.
The film begins with Sung's background and why he decided to start a bank, an idea his wife opposed as being too risky. Sung saw how residents of Chinatown in New York had problems getting loans. His bank made it a lot easier for them to get loans, and in doing so, irregularities arose. The financial statements behind those Chinatown loans were fishy. The reported income of some small businessmen on the loan applications was a lot higher than their tax returns indicated. The applicants often operated cash businesses, and, the film hints, maybe they were not reporting all their income to the IRS. There were also gifts from family or friends, which might have been loans, used as collateral in some loans.
The film argues these irregularities may have been part of the cost of doing business in Chinatown, but one thing is for sure, those loans with the fishy paperwork were not a problem as far as defaults go; those loans all performed. The bank had a reported mortgage default rate of only half of one per cent, just a tenth of the national average. Prosecutors argued that the false financial statements behind the loans were illegal because those loans were sold to federal insurers, namely the Federal National Mortgage Association (Fannie Mae).
While the case, as far as the loan documents go, might have been winnable for the prosecution, it was hampered by the credibility of its star witness, former Abacus loan officer Ken Yu, who was caught lying repeatedly on the stand. The prosecution was unable to tie any of Yu's misdeeds to his superiors. Eventually after five years of investigations, and $10 million spent by Abacus to defend itself against the charges, prosecutors ended up losing their case, and dropping charges against everyone but Yu himself.
The film raises questions about prosecution motives, including allegations of racial bias, a charge vehemently denied by prosecutors appearing in the film. Leaders of the Chinatown community in the film are clearly enraged by the entire case and the way it was handled, including a degrading “perp walk” in which Sung and his family were led to court in handcuffs and chains in front of the press. It makes you wonder.
This is a well-constructed documentary that gives the viewer a good introduction to the very impressive Sung family, as well as an examination of the complicated history of the Abacus Bank. This film rates a B.
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