In re EAGLE BANCORP

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UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11092 / August 16, 2022 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 95505 / August 16, 2022 
 
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 4321 / August 16, 2022 
 
ADMINISTRATIVE PROCEEDING 
File No.  3-20963 
 
 
 
In the Matter of 
 
EAGLE BANCORP, INC. 
 
Respondent. 
 
CORRECTED ORDER INSTITUTING 
CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTION 8A OF THE 
SECURITIES ACT OF 1933 AND 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER  
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 
Act”), against Eagle Bancorp, Inc. (“Eagle” or “Respondent”). 
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 
the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 
(“Order”), as set forth below. 
 

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III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
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 that:  
 
Summary 
 
1. These proceedings concern material misstatements and omissions that Eagle, a 
Bethesda, Maryland-based bank holding company, made about related party loans extended by 
Eagle’s principal subsidiary, EagleBank, to family trusts affiliated with Ronald D. Paul (“Paul”), 
Eagle’s former Chairman, CEO, and President, and to other related parties. 
 
2. From March 2015 through April 2018, Eagle failed to include these undisclosed 
loans – which were hundreds of millions of dollars in the aggregate and over twice the amounts it 
had publicly disclosed – in the related party loan balances included in its annual reports and proxy 
statements filed with the Commission.  Both Commission regulations and U.S. Generally Accepted 
Accounting Principles (“GAAP”) in effect during the relevant period required Eagle to disclose 
material related party transactions.  Adequate disclosure of related party transactions is essential to 
enable investors to evaluate an issuer’s corporate governance. 
 
3. In addition, following a report by a short seller in December 2017 that alleged, 
among other things, that Eagle had made significant undisclosed loans to Paul’s family trusts, 
Eagle and Paul falsely asserted that those loans were not related party loans and that Eagle was in 
compliance with all related party loan requirements.  Specifically, Eagle immediately issued two 
separate press releases, one on the day of the short seller’s report and another two days later, 
essentially denying the allegations and asserting that all relevant loans were in compliance with the 
law. 
 
4. After the release of the short seller report, numerous Eagle investors inquired of 
Eagle and Paul about the nature and amount of these loans to Paul’s family trusts, and whether they 
were or should be disclosed as related party loans.  Despite being aware of these inquiries, and 
instead of undertaking a thorough and independent investigation of the short report’s allegations, 
Eagle relied on Paul’s false assertions about the facts necessary for an accurate analysis of whether 
the loans to Paul’s family trusts were related party transactions that should have been disclosed. 
 
5. In response to these direct questions from investors and securities analysts, in 
meetings and on phone calls, Paul falsely asserted that, due to certain facts about his relationship 
with the trusts, the loans were not related party transactions and that Eagle’s related party loan 
disclosures were accurate.  In January 2018, Paul learned from Eagle’s primary regulator that it 
considered his family trusts to be related interests under applicable banking regulations. 
 
6. In its 2017 annual report filed with the Commission on March 1, 2018, Eagle again 
omitted the loans to Paul’s family trusts from its related party loan balances.  While Eagle did 
disclose in that report the existence of loans to an unspecified trust “established by an executive 
 
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  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 
person or entity in this or any other proceeding. 

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officer and director,” it falsely stated that those loans were not related party loans.  Eagle repeated 
these inaccurate disclosures in its proxy statement filed April 3, 2018. 
 
7. In advance of filing its annual report for 2018, Eagle reassessed and enhanced its 
process for identifying and disclosing related party loans.  In that annual report, filed with the 
Commission on March 1, 2019, Eagle finally disclosed the loans to Paul’s family trusts in its 
related party loan balances, and also reported previously-undisclosed related party loans to other 
Eagle directors and their families.  As a result, Eagle revised and increased its related party loan 
balances to $238 million as of December 31, 2017, from a previously-reported balance of $61 
million, and to $138 million as of December 31, 2016, from a previously-reported balance of $53 
million. 
 
8. Based on this conduct, and as described in further detail below, Eagle violated 
Sections 17(a)(2) and 17(a)(3) of the Securities Act and Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 
and 14(a) of the Exchange Act and Rules 12b-20, 13a-1 and 14a-9 thereunder. 
 
Respondent 
 
9. Eagle, a Maryland corporation based in Bethesda, Maryland, is a bank holding 
company for EagleBank.  Its common stock is registered under Section 12(b) of the Exchange Act 
and trades on the NASDAQ Capital Market.  During the relevant period, Eagle sold securities to 
the public pursuant to registration statements filed with the Commission. 
 
Eagle’s Related Party Loan Disclosures 
 
10. FASB Accounting Standards Codification Topic 850, “Related Party Disclosures” 
(“ASC 850”) requires companies to disclose in their financial statements material related party 
transactions.  Related parties include management, directors, and their immediate family members, 
and “other parties that can significantly influence the management or operating policies of the 
transacting parties or that have an ownership interest in one of the transacting parties and can 
significantly influence the other to an extent that one or more of the transacting parties might be 
prevented from fully pursuing its own separate interests.” (emphasis added) 
 
11. Rule 9-03 of Regulation S-X (“Rule 9-03”) requires bank holding companies to 
disclose the aggregate dollar amount of loans exceeding $60,000 made to directors, executive 
officers or shareholders or to any associates of such persons, as long as the aggregate amount of 
such loans exceeds 5% of shareholders’ equity.  “Associate” includes immediate family members, 
entities in which such person has at least 10% ownership, and trusts “for which such person serves 
as trustee or in a similar capacity.” 
 
12. Before March 2019, Eagle’s related party loan disclosures were not in accordance 
with GAAP or Rule 9-03.  The related party loan balances in Eagle’s financial statements and 
proxy statements did not include loans that EagleBank extended to a trust established by Paul for 
the benefit of his daughters, a trust established by Paul for the benefit of his siblings, nieces, and 

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nephews (“Trusts”), and entities in which the Trusts had a 10% or greater ownership interest 
(“Trust Loans”). 
 
13. The Trust Loans were related party loans under ASC 850 since Paul could 
“significantly influence the management or operating policies” of the Trusts and EagleBank.  
Similarly, the Trust Loans were required to be disclosed under Rule 9-03 because Paul served the 
Trusts “in a similar capacity” as a trustee.  During the relevant period, the trustee of the Trusts was 
Paul’s employee at his wholly-owned real estate development company.  Pursuant to the Trusts’ 
formation documents, Paul retained various powers over the Trusts, including the authority to 
remove the trustee, with or without cause, and appoint a new trustee, and the power to swap assets 
out of the Trusts for assets of equal value.  Paul and the Trusts had management agreements in 
place, under which Paul served as a manager of the Trusts.  Pursuant to other agreements, Paul and 
his real estate development company were entitled to development, management, and 
administrative fees in connection with certain projects the Trusts owned.  Paul also exercised 
control over the Trusts as a practical matter by routinely directing the Trusts to invest in real estate 
and other business ventures, take loans from Paul personally and from EagleBank, pay down those 
loans, and to make distributions to beneficiaries.  Paul also served as a manager of certain entities 
owned by the Trusts that received loans from EagleBank.  Paul engaged in these activities for his 
own personal gain, including as the owner or an agent of his real estate development company, and 
not as a director or officer of Eagle. 
 
Eagle’s Failure to Classify the Trust Loans as Related Party Loans 
 
14. Before March 2019, Eagle identified and reported related party loans in annual 
reports and proxy statements using the list of loans it classified as subject to Federal Reserve 
Regulation O.  Regulation O governs loans to a bank’s executive officers, directors, and principal 
shareholders, and any entity controlled by such person, including any entity over which any such 
person has “the power to exercise a controlling influence over the management or policies.”  12 
C.F.R § 215.  Prior to the second quarter of 2018, Eagle had no separate process for identifying and 
reporting related party loans under ASC 850 and Rule 9-03.  Nevertheless, under any of these 
rules, Eagle should have classified the Trust Loans as related party loans. 
 
15. Prior to the second quarter of 2018, Eagle attempted to identify all Regulation O 
loans by sending an annual survey to its officers and directors, asking them to disclose all entities – 
including trusts – that they controlled, and all entities for which they had “the power to exercise a 
controlling influence over the management or policies.”  As part of this process, Eagle officers and 
directors received annual Regulation O training and a separate memorandum with a primer on 
Regulation O. 
 
16. In February 2014, Eagle sent out the annual Regulation O survey, as well as a list of 
entities disclosed in response to the prior year’s survey.  At that time, Paul returned the 
questionnaire, striking a number of the entities owned by the Trusts.  The Eagle employee 
responsible for administering the survey questioned the deletions, and Paul responded that “the 
owners are an entity whose members consist of an Irrevocable Trust for the benefit of my children 
and/or other family members.  I have NO control, decision making for these entities.”  This 

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statement was false because Paul did have control of and make decisions for the Trusts during all 
relevant times. 
 
17. In each subsequent Regulation O survey, Paul failed to disclose to Eagle personnel 
the Trusts as entities that he controlled. 
 
18. As a result, Eagle did not classify the Trust Loans as Regulation O loans, and also 
omitted the Trust Loans from the related party loan balances in its annual reports and proxy 
statements. 
 
19. Eagle’s accounting department was not involved in the Regulation O survey 
process, and prior to December 2017, was unaware of the Trust Loans.  Eagle’s independent 
auditor was also unaware of these loans prior to December 2017.  Each year, the independent 
auditor requested a list of Eagle’s related party loans.  In response to this request, Eagle provided a 
list of Regulation O loans, which omitted the Trust Loans. 
 
20. During its audit of Eagle’s 2015 financial statements, Eagle’s independent auditor 
became aware that Eagle leased office space in a commercial property managed by Paul’s separate 
property management business from an entity in which a Trust also had a 51% interest.  The 
auditor advised that Eagle should disclose the lease as a related party transaction in its financial 
statements, and Eagle did so.  When preparing Eagle’s annual reports to be filed with the 
Commission each year thereafter, Eagle’s accounting department contacted Paul to confirm the 
substance of the related party lease disclosure.  Despite knowledge of this recurring disclosure of 
the lease as a related party transaction, Paul did not disclose the Trust Loans to Eagle’s accounting 
department or its independent auditor.  Given that neither the accounting department nor the 
independent auditor knew of the existence of the Trust Loans, neither party was in a position to ask 
Paul about those loans. 
 
Eagle’s Disclosure Failures in Annual Reports and Proxy Statements Filed in 2015-2017 
 
21. Eagle’s failure to include the Trust Loans in the total balances of related party loans 
was in contravention of GAAP and Rule 9-03, and rendered its disclosures misleading by 
understating the total balances of Eagle’s loans to related parties. 
 
22. In its 2014 annual report, filed on March 2, 2015, Eagle reported total related party 
loan balances at December 31, 2014 of $17.1 million.  In doing so, Eagle failed to include 
approximately $24.8 million of Trust Loans. 
 
23. In its 2015 annual report, filed on February 29, 2016, and its 2016 proxy statement 
filed on April 1, 2016, Eagle reported total related party loans balances at December 31, 2015 of 
$29.9 million.  In doing so, Eagle failed to include approximately $37.3 million of Trust Loans. 
 
24. In its 2016 annual report, filed on March 1, 2017, and its 2017 proxy statement filed 
on April 3, 2017, Eagle reported total related party loan balances at December 31, 2016 of $52.6 
million.  In doing so, Eagle failed to include approximately $72.7 million of Trust Loans. 

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Eagle’s Misleading Responses to the December 2017 Short Report 
 
25. On December 1, 2017, a short-selling research firm published a report, alleging, 
among other things, that Eagle had made large, undisclosed loans financing Paul’s real estate 
ventures.  The report identified several Trust Loans, explaining that they were “structured so that 
Eagle makes loans to LLCs owned by [a] Trust, an entity created by [Paul] for the benefit of his 
family ... and the properties held by the trust appear to be controlled by Paul as an extension of 
[his wholly-owned real estate development company].” 
 
26. Following the release of the report, Eagle’s stock price dropped by more than 24%, 
to close at $49.95 on December 1, 2017, from a $66.15 closing price the prior trading day. 
 
27. On December 1, 2017, the same day that the short seller’s report was published, 
Eagle issued a press release, subsequently filed with the Commission on Form 8-K, titled, “Eagle 
Bancorp, Inc. Denies Allegations In Deceptive and Misleading Report.”  In the press release, 
“Eagle categorically reject[ed] the assertions and implications” in the short report.  Specifically 
addressing the allegations regarding undisclosed loans to entities related to Paul, the release stated: 
 
All Loans Referenced in the Piece Fully Meet Legal 
Requirements.  The only credit issued by Eagle to the identified 
executive was a line of credit in case of an overdraft; the line never 
was used and has not been funded.  Eagle takes seriously its 
obligation to comply with all applicable laws and regulations, 
including Regulation O.  Its compliance is regularly examined 
internally, and is also examined by agency regulators.  Contrary to 
the misrepresentations by [the short seller], the loans identified in 
the piece were not made to the identified executive, and, in any 
event, were approved and disclosed (where required) in 
compliance with Regulation O.  
 
28. Two days later, on Sunday, December 3, 2017, Eagle issued another press release, 
subsequently filed with the Commission on Form 8-K: “Eagle Bancorp Rebuts Claims of Internal 
Control Weaknesses and Alerts Shareholders and Customers to be Wary of Unscrupulous Short 
Seller Tactics,” which stated: 
 
There are required disclosures of loans to insiders (as defined in 
Regulation O), both in annual filings with the Securities and 
Exchange Commission and in quarterly Bank regulatory reports.  
The filings by the Company have always been complete, receiving 
the attention of monthly Board meetings, the Bank’s Compliance 
team, the internal Disclosure Controls Committee and the Audit 
Committee of the Board.  In addition, there are external 
independent auditor reviews.  In all such cases, the loans are made 
on market-rate, not preferential, rates and terms.  The Bank treats 

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insider and related party loans exactly the same as borrowers who 
have no director or officer relationship with the Bank. . . .  
 
Our internal controls are strong and all required disclosures, 
including loans to insiders, have been met. . . . 
 
The allegations intimated last Friday by the short seller . . . that 
Eagle’s pricing, underwriting, internal controls and/or its 
disclosures are somehow lacking are totally unfounded.  
 
29. In a letter written by Paul and others to EagleBank customers dated December 4, 
2017, and subsequently filed with the Commission on Form 8-K, Eagle stated that: “The short 
seller alleged that EagleBank and its directors and officers acted improperly in making loans to 
insiders.  EagleBank categorically rejects this deceptive and misleading allegation. . . .  Any loans 
subject to Regulation O (the regulation that addresses the rules and processes for making loans to 
insiders) have been made, approved and disclosed in compliance with that regulation.” 
 
30. These statements were either materially false or misleading.  As discussed, Eagle’s 
failure to include the Trust Loans in the total balances of related party loans was in contravention 
of GAAP and Rule 9-03, and rendered its disclosures from 2015-2017 misleading by understating 
the total balances of Eagle’s loans to related parties.  Furthermore, the majority of the loans 
referenced in the short seller report itself were loans that should have been included in Eagle’s 
prior related party loan disclosures, but were not.  Instead of undertaking a thorough and 
independent investigation of the short report’s allegations, Eagle relied on Paul’s false assertions 
about the facts necessary for an accurate analysis of whether the Trust Loans were related party 
transactions that should have been disclosed. 
 
31. On December 4, 2017, the first trading day after the short report was published and 
after Eagle’s press releases were issued, Eagle’s stock price rebounded 13%. 
 
32. Following the release of the short report, in December 2017, numerous investors 
and analysts contacted Eagle to inquire as to the accuracy of the allegations in the report.  Among 
other things, investors and analysts asked about the amount of Eagle’s Regulation O or related 
party loans and whether the Trust Loans should be classified as such.  In calls and meetings with 
investors and analysts, Paul falsely asserted that the Trust Loans were not related party loans, 
because he did not control or make any decisions for the Trusts, which he knew was untrue.  In 
these calls and meetings, Paul also falsely asserted that Eagle’s related party loan disclosures were 
complete.  Paul also gave interviews to several media outlets, asserting that the short report was 
“100 percent false.” 
 
Eagle Made Material Misstatements and Omissions in Its 2017 Annual Report 
 
33. In a January 31, 2018 meeting, examiners from the Federal Reserve Bank of 
Richmond (“FRB”) advised Paul and Eagle that the Trusts were related interests of Paul because 
he had the ability to replace the trustee and swap assets of the Trusts at will, and therefore the Trust 

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Loans were in violation of Regulation O.  Eagle understood that if the Trust Loans were subject to 
Regulation O, then they also would need to be disclosed as related party loans in Eagle’s financial 
statements. 
 
34. Paul and Eagle were aware that Eagle’s independent auditor contacted FRB 
examiners to discuss the Regulation O status of the Trust Loans with the FRB examiners, and that 
the examiners would not discuss the issue since it related to a pending examination.  However, no 
one from Eagle told the independent auditor that the FRB had determined that the Trust Loans 
were Regulation O loans.  A March 1, 2018 management representation letter to the independent 
auditor, signed by Paul, stated: “We have not received information from [the FRB] that could have 
a material impact on the financial statements, particularly as it relates to the determination of 
related parties. . . There have been no . . . Violations or possible violations of laws or regulations.” 
 
35. In February 2018, Eagle’s independent auditor determined that the Trust Loans 
should be disclosed as related party transactions in Eagle’s financial statements because Paul had 
the ability to exercise significant influence over the Trusts due to his employment of the trustee.  
The independent auditor also concluded that Eagle’s failure to disclose these loans previously was 
a significant deficiency in its internal controls over financial reporting.   
 
36. The independent auditor discussed its conclusions at a February 27, 2018 Audit 
Committee meeting involving Paul, other Eagle officers and employees, and Eagle’s outside 
counsel.  Eagle and its outside counsel disagreed with the auditor’s conclusions, and stated their 
belief that “because there is a separate trustee responsible for management of the trust, and 
distributions, if any, to the named beneficiaries are completely discretionary with the trustee, the 
relationship was not a related party.” 
 
37. As a compromise, Eagle agreed to disclose in the annual report the existence of 
loans to an unspecified trust created by an unspecified officer and director, while not classifying 
them as related party loans. 
 
38. In its 2017 annual report, filed on March 1, 2018, Eagle reported total related party 
loan balances at December 31, 2017 of $60.9 million.  In doing so, Eagle failed to include 
approximately $89.6 million of Trust Loans. 
 
39. In a paragraph below the related party loan balances, Eagle stated: 
 
The Bank has made an aggregate of $4.0 million of loans to a trust 
with an independent third party trustee, established by an 
executive officer and director, of which the children of such 
executive officer and director are discretionary beneficiaries, and 
over which such individuals have no investment or operational 
authority, and an aggregate of $65.6 million of loans to entities in 
which the trust has an ownership interest in excess of 10%, which 
the Company does not consider to be related party transactions. 
(emphasis added) 

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40. This description was misleading for several reasons.  First, the disclosure 
characterized the trustee as an “independent third party,” without specifying that the trustee was 
Paul’s employee and close friend, and that Paul had the unilateral right to remove the trustee 
without cause.  Second, in many instances, Paul in fact exercised investment and operational 
authority over the Trust.  Third, because Paul exercised investment and operational authority over 
the Trusts, the Trust Loans were related party transactions. 
 
41. While Eagle’s 2017 annual report stated that the loans to an unspecified trust were 
not related party transactions, the same document disclosed a lease for office space in a 
commercial property managed by Paul’s separate property management business from an entity in 
which a Trust also had a 51% interest as a related party transaction.  Specifically, the annual report 
identified lease payments to “a limited liability company in which a trust for the benefit of an 
executive officer’s children has a 51% interest” as related party transactions.  The independent 
auditor informed Eagle about this discrepancy before the annual report was filed, but it was not 
resolved. 
 
Eagle Repeats Misstatements and Omissions in its 2018 Proxy Statement 
 
42. On March 2, 2018, the day after Eagle filed its 2017 annual report, Eagle started 
treating at least one of the Trust Loans as a Regulation O loan in its internal systems.  This change 
was made in response to FRB examiners, who expressed concerns to Eagle that the Trust Loans 
were subject to Regulation O. 
 
43. Despite this internal reclassification of a Trust Loan as a Regulation O loan, Eagle’s 
2018 proxy statement, filed on April 3, 2018, did not disclose the Trust Loans as related party 
loans: 
 
The maximum aggregate amount of loans (including lines of credit) 
to officers, directors and affiliates of the Company and their related 
interests during the year ended December 31, 2017 amounted to $85 
million, representing approximately 8.9% of the Company’s total 
shareholders’ equity at December 31, 2017. . . . The Bank has made 
an aggregate of $4.0 million of loans to a trust with an independent 
third party trustee, established by an executive officer and director, 
of which the children of such executive officer and director are 
discretionary beneficiaries, and over which such individuals have no 
investment or operational authority, and an aggregate of $65.6 
million of loans to entities in which the trust has an ownership 
interest in excess of 10%, which the Company does not consider to 
be related party transactions. 
 

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Eagle Discloses Revised Related Party Loan Balances in its 2018 Annual Report 
 
44. In May 2018, Eagle received the final joint examination report from the FRB and a 
state regulator, which found that Paul had “a controlling influence over the management of the 
trusts” and “[a]s a result of his control, both trusts are deemed related interests of CEO [] and are 
subject to Regulation O.” 
 
45. During the second quarter of 2018, Eagle began developing a new, enhanced 
process to identify and disclose all related party transactions in its financial statements and filings 
with the Commission.  This process no longer relied exclusively on Regulation O, but was 
designed to identify related party transactions under all applicable rules, including ASC 850 and 
Rule 9-03. 
 
46. As a result of this improved process, Eagle identified additional related party loans, 
including loans to an entity in which a director was a trustee, loans to an entity in which a director 
had an ownership interest exceeding 10%, and loans to an entity in which a director’s son had an 
ownership interest exceeding 10%. 
 
47. In its 2018 annual report, filed on March 1, 2019, Eagle included the Trust Loans, 
as well as loans identified as a result of its process improvements, in its related party loan balances.  
Eagle disclosed an increase in the outstanding related party loan balances to $238 million as of 
December 31, 2017, from a previously-reported balance of $61 million, and to $138 million as of 
December 31, 2016, from a previously-reported balance of $53 million. 
 
Eagle’s False Books and Records and Inadequate Internal Controls 
 
48. During the relevant period, Eagle’s books and records understated its related party 
loan balances for the reasons discussed above.  Furthermore, during the relevant period, Eagle’s 
internal controls were insufficient to prevent these misstatements.  Specifically, Eagle’s process for 
identifying related party loans relied on the wrong definition of “related party” – Regulation O 
instead of ASC 850 and Rule 9-03 – and heavily and unreasonably relied on Eagle’s officers and 
directors understanding and correctly reporting all related parties that met that technical definition. 
 
49. In March 2019, shortly after the filing of its 2018 annual report, Paul retired from 
Eagle, citing health reasons.  As part of the December 31, 2019 audit, Eagle’s independent auditor 
identified a material weakness in Eagle’s internal control over financial reporting “resulting from 
tone at the top issues that contributed to a control environment that was insufficiently tailored to 
the culture of deference afforded to” Paul.  Subsequently, as part of the December 31, 2020 audit, 
Eagle’s independent auditor found that “[a]s of December 31, 2020, the enhanced controls are 
operating effectively and the deficiencies that contributed to the Material Weakness [identified in 
the 2019 audit] have been fully and effectively remediated.” 
 

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Violations 
 
50. As a result of the conduct described above, Eagle violated Sections 17(a)(2) and 
17(a)(3) of the Securities Act, which prohibit any person from directly or indirectly obtaining 
money or property by means of any untrue statement of material fact or any omission to state a 
material fact necessary in order to make the statements made, in light of the circumstances under 
which they are made, not misleading, or engaging in any transaction, practice, or course of 
business which operates or would operate as a fraud or deceit upon the purchaser, in the offer or 
sale of securities.  A violation of these provisions does not require scienter and may rest on a 
finding of negligence. 
 
51. As a result of the conduct described above, Eagle violated Section 13(a) of the 
Exchange Act and Rule 13a-1 thereunder, which require issuers with securities registered under 
Section 12 of the Exchange Act to file annual, current, and quarterly reports with the Commission 
containing such information as the Commission’s rules may require.  Eagle also violated Rule 12b-
20 of the Exchange Act, which requires an issuer to include in a statement or report filed with the 
Commission any information necessary to make the required statements in the filing not materially 
misleading.  A violation of these reporting provisions does not require scienter. 
 
52. As a result of the conduct described above, Eagle violated Section 13(b)(2)(A) of 
the Exchange Act, which requires issuers with securities registered under Section 12 of the 
Exchange Act to make and keep books, records, and accounts which, in reasonable detail, 
accurately and fairly reflect the transactions and dispositions of assets of the issuer.  Scienter is not 
an element of the books and records provision.  
 
53. As a result of the conduct described above, Eagle violated Section 13(b)(2)(B) of 
the Exchange Act, which requires issuers with securities registered under Section 12 of the 
Exchange Act to devise and maintain a system of internal accounting controls sufficient to provide 
reasonable assurance that, among other things, transactions are recorded as necessary to permit 
preparation of financial statements in conformity with GAAP.  Scienter is not an element of the 
internal accounting control provisions. 
 
54. As a result of the conduct described above, Eagle violated Section 14(a) of the 
Exchange Act and Rule 14a-9 thereunder.  Section 14(a) of the Exchange Act makes it unlawful to 
solicit any proxy in respect of securities registered under Section 12 of the Exchange Act in 
contravention of such rules and regulations as the Commission may prescribe.  Rule 14a-9 
prohibits the use of proxy statements containing materially false or misleading statements or 
materially misleading omissions.  No showing of scienter is required to establish a violation of 
Section 14(a) of the Exchange Act or Rule 14a-9 thereunder.  
 
Disgorgement and Civil Penalties 
 
The disgorgement and prejudgment interest ordered in paragraph IV.B, infra, is 
consistent with equitable principles and does not exceed Respondent’s net profits from its 
violations and will be distributed to harmed investors to the extent feasible.  The Commission 

 12 
will hold funds paid pursuant to paragraph IV.B in an account at the United States Treasury 
pending distribution.  Upon approval of the distribution final accounting by the Commission, any 
amounts remaining that are infeasible to return to investors, and any amounts returned to the 
Commission in the future that are infeasible to return to investors, may be transferred to the 
general fund of the U.S. Treasury, subject to Section 21F(g)(3) of the Exchange Act. 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Eagle’s Offer. 
 
 Accordingly, pursuant to Sections 8A of the Securities Act and Section 21C of the 
Exchange Act, it is hereby ORDERED that: 
 
 A. Respondent Eagle cease and desist from committing or causing any violations and 
any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections 13(a), 
13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1, and 14a-9 
thereunder. 
 
B. Respondent Eagle shall, within 10 days of the entry of this Order, pay disgorgement 
of $2,600,000, prejudgment interest of $750,493, and a civil money penalty in the amount of 
$10,000,000 to the Securities and Exchange Commission.  If timely payment of disgorgement and 
prejudgment interest is not made, additional interest shall accrue pursuant to SEC Rule of Practice 
600, and, if timely payment of a civil money penalty is not made, additional interest shall accrue 
pursuant to 31 U.S.C. § 3717. 
 
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 

 13 
Payments by check or money order must be accompanied by a cover letter identifying Eagle as a 
Respondent in these proceedings, and the file number of these proceedings; a copy of the cover 
letter and check or money order must be sent to Kevin Guerrero, Assistant Director, Division of 
Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.   
 
 C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 
created for the disgorgement, prejudgment interest, and penalties referenced in paragraph IV.B 
above.  This Fair Fund may be combined with any fund established for the benefit of harmed 
investors in SEC v. Ronald D. Paul, 22-cv-06985 (S.D.N.Y.).  Amounts ordered to be paid as civil 
money penalties pursuant to this Order shall be treated as penalties paid to the government for all 
purposes, including all tax purposes.  To preserve the deterrent effect of the civil penalty, 
Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor 
shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any 
part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 
any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 
days after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in 
this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission.  
Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change 
the amount of the civil penalty imposed in this proceeding.  For purposes of this paragraph, a 
“Related Investor Action” means a private damages action brought against Respondent by or on 
behalf of one or more investors based on substantially the same facts as alleged in the Order 
instituted by the Commission in this proceeding. 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11092 / August 16, 2022 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 95505 / August 16, 2022 

 

ACCOUNTING AND AUDITING ENFORCEMENT 

Release No. 4321 / August 16, 2022 

 

ADMINISTRATIVE PROCEEDING 

File No.  3-20963 

 

 

 

In the Matter of 

 

EAGLE BANCORP, INC. 

 

Respondent. 

 

CORRECTED ORDER INSTITUTING 

CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTION 8A OF THE 

SECURITIES ACT OF 1933 AND 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER  

  

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”), against Eagle Bancorp, Inc. (“Eagle” or “Respondent”). 

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 

the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 

(“Order”), as set forth below. 

 



 2 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary 

 

1. These proceedings concern material misstatements and omissions that Eagle, a 

Bethesda, Maryland-based bank holding company, made about related party loans extended by 

Eagle’s principal subsidiary, EagleBank, to family trusts affiliated with Ronald D. Paul (“Paul”), 

Eagle’s former Chairman, CEO, and President, and to other related parties. 

 

2. From March 2015 through April 2018, Eagle failed to include these undisclosed 

loans – which were hundreds of millions of dollars in the aggregate and over twice the amounts it 

had publicly disclosed – in the related party loan balances included in its annual reports and proxy 

statements filed with the Commission.  Both Commission regulations and U.S. Generally Accepted 

Accounting Principles (“GAAP”) in effect during the relevant period required Eagle to disclose 

material related party transactions.  Adequate disclosure of related party transactions is essential to 

enable investors to evaluate an issuer’s corporate governance. 

 

3. In addition, following a report by a short seller in December 2017 that alleged, 

among other things, that Eagle had made significant undisclosed loans to Paul’s family trusts, 

Eagle and Paul falsely asserted that those loans were not related party loans and that Eagle was in 

compliance with all related party loan requirements.  Specifically, Eagle immediately issued two 

separate press releases, one on the day of the short seller’s report and another two days later, 

essentially denying the allegations and asserting that all relevant loans were in compliance with the 

law. 

 

4. After the release of the short seller report, numerous Eagle investors inquired of 

Eagle and Paul about the nature and amount of these loans to Paul’s family trusts, and whether they 

were or should be disclosed as related party loans.  Despite being aware of these inquiries, and 

instead of undertaking a thorough and independent investigation of the short report’s allegations, 

Eagle relied on Paul’s false assertions about the facts necessary for an accurate analysis of whether 

the loans to Paul’s family trusts were related party transactions that should have been disclosed. 

 

5. In response to these direct questions from investors and securities analysts, in 

meetings and on phone calls, Paul falsely asserted that, due to certain facts about his relationship 

with the trusts, the loans were not related party transactions and that Eagle’s related party loan 

disclosures were accurate.  In January 2018, Paul learned from Eagle’s primary regulator that it 

considered his family trusts to be related interests under applicable banking regulations. 

 

6. In its 2017 annual report filed with the Commission on March 1, 2018, Eagle again 

omitted the loans to Paul’s family trusts from its related party loan balances.  While Eagle did 

disclose in that report the existence of loans to an unspecified trust “established by an executive 

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 

person or entity in this or any other proceeding. 



 3 

officer and director,” it falsely stated that those loans were not related party loans.  Eagle repeated 

these inaccurate disclosures in its proxy statement filed April 3, 2018. 

 

7. In advance of filing its annual report for 2018, Eagle reassessed and enhanced its 

process for identifying and disclosing related party loans.  In that annual report, filed with the 

Commission on March 1, 2019, Eagle finally disclosed the loans to Paul’s family trusts in its 

related party loan balances, and also reported previously-undisclosed related party loans to other 

Eagle directors and their families.  As a result, Eagle revised and increased its related party loan 

balances to $238 million as of December 31, 2017, from a previously-reported balance of $61 

million, and to $138 million as of December 31, 2016, from a previously-reported balance of $53 

million. 

 

8. Based on this conduct, and as described in further detail below, Eagle violated 

Sections 17(a)(2) and 17(a)(3) of the Securities Act and Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), 

and 14(a) of the Exchange Act and Rules 12b-20, 13a-1 and 14a-9 thereunder. 

 

Respondent 

 

9. Eagle, a Maryland corporation based in Bethesda, Maryland, is a bank holding 

company for EagleBank.  Its common stock is registered under Section 12(b) of the Exchange Act 

and trades on the NASDAQ Capital Market.  During the relevant period, Eagle sold securities to 

the public pursuant to registration statements filed with the Commission. 

 

Eagle’s Related Party Loan Disclosures 

 

10. FASB Accounting Standards Codification Topic 850, “Related Party Disclosures” 

(“ASC 850”) requires companies to disclose in their financial statements material related party 

transactions.  Related parties include management, directors, and their immediate family members, 

and “other parties that can significantly influence the management or operating policies of the 

transacting parties or that have an ownership interest in one of the transacting parties and can 

significantly influence the other to an extent that one or more of the transacting parties might be 

prevented from fully pursuing its own separate interests.” (emphasis added) 

 

11. Rule 9-03 of Regulation S-X (“Rule 9-03”) requires bank holding companies to 

disclose the aggregate dollar amount of loans exceeding $60,000 made to directors, executive 

officers or shareholders or to any associates of such persons, as long as the aggregate amount of 

such loans exceeds 5% of shareholders’ equity.  “Associate” includes immediate family members, 

entities in which such person has at least 10% ownership, and trusts “for which such person serves 

as trustee or in a similar capacity.” 

 

12. Before March 2019, Eagle’s related party loan disclosures were not in accordance 

with GAAP or Rule 9-03.  The related party loan balances in Eagle’s financial statements and 

proxy statements did not include loans that EagleBank extended to a trust established by Paul for 

the benefit of his daughters, a trust established by Paul for the benefit of his siblings, nieces, and 



 4 

nephews (“Trusts”), and entities in which the Trusts had a 10% or greater ownership interest 

(“Trust Loans”). 

 

13. The Trust Loans were related party loans under ASC 850 since Paul could 

“significantly influence the management or operating policies” of the Trusts and EagleBank.  

Similarly, the Trust Loans were required to be disclosed under Rule 9-03 because Paul served the 

Trusts “in a similar capacity” as a trustee.  During the relevant period, the trustee of the Trusts was 

Paul’s employee at his wholly-owned real estate development company.  Pursuant to the Trusts’ 

formation documents, Paul retained various powers over the Trusts, including the authority to 

remove the trustee, with or without cause, and appoint a new trustee, and the power to swap assets 

out of the Trusts for assets of equal value.  Paul and the Trusts had management agreements in 

place, under which Paul served as a manager of the Trusts.  Pursuant to other agreements, Paul and 

his real estate development company were entitled to development, management, and 

administrative fees in connection with certain projects the Trusts owned.  Paul also exercised 

control over the Trusts as a practical matter by routinely directing the Trusts to invest in real estate 

and other business ventures, take loans from Paul personally and from EagleBank, pay down those 

loans, and to make distributions to beneficiaries.  Paul also served as a manager of certain entities 

owned by the Trusts that received loans from EagleBank.  Paul engaged in these activities for his 

own personal gain, including as the owner or an agent of his real estate development company, and 

not as a director or officer of Eagle. 

 

Eagle’s Failure to Classify the Trust Loans as Related Party Loans 

 

14. Before March 2019, Eagle identified and reported related party loans in annual 

reports and proxy statements using the list of loans it classified as subject to Federal Reserve 

Regulation O.  Regulation O governs loans to a bank’s executive officers, directors, and principal 

shareholders, and any entity controlled by such person, including any entity over which any such 

person has “the power to exercise a controlling influence over the management or policies.”  12 

C.F.R § 215.  Prior to the second quarter of 2018, Eagle had no separate process for identifying and 

reporting related party loans under ASC 850 and Rule 9-03.  Nevertheless, under any of these 

rules, Eagle should have classified the Trust Loans as related party loans. 

 

15. Prior to the second quarter of 2018, Eagle attempted to identify all Regulation O 

loans by sending an annual survey to its officers and directors, asking them to disclose all entities – 

including trusts – that they controlled, and all entities for which they had “the power to exercise a 

controlling influence over the management or policies.”  As part of this process, Eagle officers and 

directors received annual Regulation O training and a separate memorandum with a primer on 

Regulation O. 

 

16. In February 2014, Eagle sent out the annual Regulation O survey, as well as a list of 

entities disclosed in response to the prior year’s survey.  At that time, Paul returned the 

questionnaire, striking a number of the entities owned by the Trusts.  The Eagle employee 

responsible for administering the survey questioned the deletions, and Paul responded that “the 

owners are an entity whose members consist of an Irrevocable Trust for the benefit of my children 

and/or other family members.  I have NO control, decision making for these entities.”  This 



 5 

statement was false because Paul did have control of and make decisions for the Trusts during all 

relevant times. 

 

17. In each subsequent Regulation O survey, Paul failed to disclose to Eagle personnel 

the Trusts as entities that he controlled. 

 

18. As a result, Eagle did not classify the Trust Loans as Regulation O loans, and also 

omitted the Trust Loans from the related party loan balances in its annual reports and proxy 

statements. 

 

19. Eagle’s accounting department was not involved in the Regulation O survey 

process, and prior to December 2017, was unaware of the Trust Loans.  Eagle’s independent 

auditor was also unaware of these loans prior to December 2017.  Each year, the independent 

auditor requested a list of Eagle’s related party loans.  In response to this request, Eagle provided a 

list of Regulation O loans, which omitted the Trust Loans. 

 

20. During its audit of Eagle’s 2015 financial statements, Eagle’s independent auditor 

became aware that Eagle leased office space in a commercial property managed by Paul’s separate 

property management business from an entity in which a Trust also had a 51% interest.  The 

auditor advised that Eagle should disclose the lease as a related party transaction in its financial 

statements, and Eagle did so.  When preparing Eagle’s annual reports to be filed with the 

Commission each year thereafter, Eagle’s accounting department contacted Paul to confirm the 

substance of the related party lease disclosure.  Despite knowledge of this recurring disclosure of 

the lease as a related party transaction, Paul did not disclose the Trust Loans to Eagle’s accounting 

department or its independent auditor.  Given that neither the accounting department nor the 

independent auditor knew of the existence of the Trust Loans, neither party was in a position to ask 

Paul about those loans. 

 

Eagle’s Disclosure Failures in Annual Reports and Proxy Statements Filed in 2015-2017 

 

21. Eagle’s failure to include the Trust Loans in the total balances of related party loans 

was in contravention of GAAP and Rule 9-03, and rendered its disclosures misleading by 

understating the total balances of Eagle’s loans to related parties. 

 

22. In its 2014 annual report, filed on March 2, 2015, Eagle reported total related party 

loan balances at December 31, 2014 of $17.1 million.  In doing so, Eagle failed to include 

approximately $24.8 million of Trust Loans. 

 

23. In its 2015 annual report, filed on February 29, 2016, and its 2016 proxy statement 

filed on April 1, 2016, Eagle reported total related party loans balances at December 31, 2015 of 

$29.9 million.  In doing so, Eagle failed to include approximately $37.3 million of Trust Loans. 

 

24. In its 2016 annual report, filed on March 1, 2017, and its 2017 proxy statement filed 

on April 3, 2017, Eagle reported total related party loan balances at December 31, 2016 of $52.6 

million.  In doing so, Eagle failed to include approximately $72.7 million of Trust Loans. 



 6 

 

Eagle’s Misleading Responses to the December 2017 Short Report 

 

25. On December 1, 2017, a short-selling research firm published a report, alleging, 

among other things, that Eagle had made large, undisclosed loans financing Paul’s real estate 

ventures.  The report identified several Trust Loans, explaining that they were “structured so that 

Eagle makes loans to LLCs owned by [a] Trust, an entity created by [Paul] for the benefit of his 

family … and the properties held by the trust appear to be controlled by Paul as an extension of 

[his wholly-owned real estate development company].” 

 

26. Following the release of the report, Eagle’s stock price dropped by more than 24%, 

to close at $49.95 on December 1, 2017, from a $66.15 closing price the prior trading day. 

 

27. On December 1, 2017, the same day that the short seller’s report was published, 

Eagle issued a press release, subsequently filed with the Commission on Form 8-K, titled, “Eagle 

Bancorp, Inc. Denies Allegations In Deceptive and Misleading Report.”  In the press release, 

“Eagle categorically reject[ed] the assertions and implications” in the short report.  Specifically 

addressing the allegations regarding undisclosed loans to entities related to Paul, the release stated: 

 

All Loans Referenced in the Piece Fully Meet Legal 

Requirements.  The only credit issued by Eagle to the identified 

executive was a line of credit in case of an overdraft; the line never 

was used and has not been funded.  Eagle takes seriously its 

obligation to comply with all applicable laws and regulations, 

including Regulation O.  Its compliance is regularly examined 

internally, and is also examined by agency regulators.  Contrary to 

the misrepresentations by [the short seller], the loans identified in 

the piece were not made to the identified executive, and, in any 

event, were approved and disclosed (where required) in 

compliance with Regulation O.  

 

28. Two days later, on Sunday, December 3, 2017, Eagle issued another press release, 

subsequently filed with the Commission on Form 8-K: “Eagle Bancorp Rebuts Claims of Internal 

Control Weaknesses and Alerts Shareholders and Customers to be Wary of Unscrupulous Short 

Seller Tactics,” which stated: 

 

There are required disclosures of loans to insiders (as defined in 

Regulation O), both in annual filings with the Securities and 

Exchange Commission and in quarterly Bank regulatory reports.  

The filings by the Company have always been complete, receiving 

the attention of monthly Board meetings, the Bank’s Compliance 

team, the internal Disclosure Controls Committee and the Audit 

Committee of the Board.  In addition, there are external 

independent auditor reviews.  In all such cases, the loans are made 

on market-rate, not preferential, rates and terms.  The Bank treats 



 7 

insider and related party loans exactly the same as borrowers who 

have no director or officer relationship with the Bank. . . .  

 

Our internal controls are strong and all required disclosures, 

including loans to insiders, have been met. . . . 

 

The allegations intimated last Friday by the short seller . . . that 

Eagle’s pricing, underwriting, internal controls and/or its 

disclosures are somehow lacking are totally unfounded.  

 

29. In a letter written by Paul and others to EagleBank customers dated December 4, 

2017, and subsequently filed with the Commission on Form 8-K, Eagle stated that: “The short 

seller alleged that EagleBank and its directors and officers acted improperly in making loans to 

insiders.  EagleBank categorically rejects this deceptive and misleading allegation. . . .  Any loans 

subject to Regulation O (the regulation that addresses the rules and processes for making loans to 

insiders) have been made, approved and disclosed in compliance with that regulation.” 

 

30. These statements were either materially false or misleading.  As discussed, Eagle’s 

failure to include the Trust Loans in the total balances of related party loans was in contravention 

of GAAP and Rule 9-03, and rendered its disclosures from 2015-2017 misleading by understating 

the total balances of Eagle’s loans to related parties.  Furthermore, the majority of the loans 

referenced in the short seller report itself were loans that should have been included in Eagle’s 

prior related party loan disclosures, but were not.  Instead of undertaking a thorough and 

independent investigation of the short report’s allegations, Eagle relied on Paul’s false assertions 

about the facts necessary for an accurate analysis of whether the Trust Loans were related party 

transactions that should have been disclosed. 

 

31. On December 4, 2017, the first trading day after the short report was published and 

after Eagle’s press releases were issued, Eagle’s stock price rebounded 13%. 

 

32. Following the release of the short report, in December 2017, numerous investors 

and analysts contacted Eagle to inquire as to the accuracy of the allegations in the report.  Among 

other things, investors and analysts asked about the amount of Eagle’s Regulation O or related 

party loans and whether the Trust Loans should be classified as such.  In calls and meetings with 

investors and analysts, Paul falsely asserted that the Trust Loans were not related party loans, 

because he did not control or make any decisions for the Trusts, which he knew was untrue.  In 

these calls and meetings, Paul also falsely asserted that Eagle’s related party loan disclosures were 

complete.  Paul also gave interviews to several media outlets, asserting that the short report was 

“100 percent false.” 

 

Eagle Made Material Misstatements and Omissions in Its 2017 Annual Report 

 

33. In a January 31, 2018 meeting, examiners from the Federal Reserve Bank of 

Richmond (“FRB”) advised Paul and Eagle that the Trusts were related interests of Paul because 

he had the ability to replace the trustee and swap assets of the Trusts at will, and therefore the Trust 



 8 

Loans were in violation of Regulation O.  Eagle understood that if the Trust Loans were subject to 

Regulation O, then they also would need to be disclosed as related party loans in Eagle’s financial 

statements. 

 

34. Paul and Eagle were aware that Eagle’s independent auditor contacted FRB 

examiners to discuss the Regulation O status of the Trust Loans with the FRB examiners, and that 

the examiners would not discuss the issue since it related to a pending examination.  However, no 

one from Eagle told the independent auditor that the FRB had determined that the Trust Loans 

were Regulation O loans.  A March 1, 2018 management representation letter to the independent 

auditor, signed by Paul, stated: “We have not received information from [the FRB] that could have 

a material impact on the financial statements, particularly as it relates to the determination of 

related parties. . . There have been no . . . Violations or possible violations of laws or regulations.” 

 

35. In February 2018, Eagle’s independent auditor determined that the Trust Loans 

should be disclosed as related party transactions in Eagle’s financial statements because Paul had 

the ability to exercise significant influence over the Trusts due to his employment of the trustee.  

The independent auditor also concluded that Eagle’s failure to disclose these loans previously was 

a significant deficiency in its internal controls over financial reporting.   

 

36. The independent auditor discussed its conclusions at a February 27, 2018 Audit 

Committee meeting involving Paul, other Eagle officers and employees, and Eagle’s outside 

counsel.  Eagle and its outside counsel disagreed with the auditor’s conclusions, and stated their 

belief that “because there is a separate trustee responsible for management of the trust, and 

distributions, if any, to the named beneficiaries are completely discretionary with the trustee, the 

relationship was not a related party.” 

 

37. As a compromise, Eagle agreed to disclose in the annual report the existence of 

loans to an unspecified trust created by an unspecified officer and director, while not classifying 

them as related party loans. 

 

38. In its 2017 annual report, filed on March 1, 2018, Eagle reported total related party 

loan balances at December 31, 2017 of $60.9 million.  In doing so, Eagle failed to include 

approximately $89.6 million of Trust Loans. 

 

39. In a paragraph below the related party loan balances, Eagle stated: 

 

The Bank has made an aggregate of $4.0 million of loans to a trust 

with an independent third party trustee, established by an 

executive officer and director, of which the children of such 

executive officer and director are discretionary beneficiaries, and 

over which such individuals have no investment or operational 

authority, and an aggregate of $65.6 million of loans to entities in 

which the trust has an ownership interest in excess of 10%, which 

the Company does not consider to be related party transactions. 

(emphasis added) 



 9 

 

40. This description was misleading for several reasons.  First, the disclosure 

characterized the trustee as an “independent third party,” without specifying that the trustee was 

Paul’s employee and close friend, and that Paul had the unilateral right to remove the trustee 

without cause.  Second, in many instances, Paul in fact exercised investment and operational 

authority over the Trust.  Third, because Paul exercised investment and operational authority over 

the Trusts, the Trust Loans were related party transactions. 

 

41. While Eagle’s 2017 annual report stated that the loans to an unspecified trust were 

not related party transactions, the same document disclosed a lease for office space in a 

commercial property managed by Paul’s separate property management business from an entity in 

which a Trust also had a 51% interest as a related party transaction.  Specifically, the annual report 

identified lease payments to “a limited liability company in which a trust for the benefit of an 

executive officer’s children has a 51% interest” as related party transactions.  The independent 

auditor informed Eagle about this discrepancy before the annual report was filed, but it was not 

resolved. 

 

Eagle Repeats Misstatements and Omissions in its 2018 Proxy Statement 

 

42. On March 2, 2018, the day after Eagle filed its 2017 annual report, Eagle started 

treating at least one of the Trust Loans as a Regulation O loan in its internal systems.  This change 

was made in response to FRB examiners, who expressed concerns to Eagle that the Trust Loans 

were subject to Regulation O. 

 

43. Despite this internal reclassification of a Trust Loan as a Regulation O loan, Eagle’s 

2018 proxy statement, filed on April 3, 2018, did not disclose the Trust Loans as related party 

loans: 

 

The maximum aggregate amount of loans (including lines of credit) 

to officers, directors and affiliates of the Company and their related 

interests during the year ended December 31, 2017 amounted to $85 

million, representing approximately 8.9% of the Company’s total 

shareholders’ equity at December 31, 2017. . . . The Bank has made 

an aggregate of $4.0 million of loans to a trust with an independent 

third party trustee, established by an executive officer and director, 

of which the children of such executive officer and director are 

discretionary beneficiaries, and over which such individuals have no 

investment or operational authority, and an aggregate of $65.6 

million of loans to entities in which the trust has an ownership 

interest in excess of 10%, which the Company does not consider to 

be related party transactions. 

 



 10 

Eagle Discloses Revised Related Party Loan Balances in its 2018 Annual Report 

 

44. In May 2018, Eagle received the final joint examination report from the FRB and a 

state regulator, which found that Paul had “a controlling influence over the management of the 

trusts” and “[a]s a result of his control, both trusts are deemed related interests of CEO [] and are 

subject to Regulation O.” 

 

45. During the second quarter of 2018, Eagle began developing a new, enhanced 

process to identify and disclose all related party transactions in its financial statements and filings 

with the Commission.  This process no longer relied exclusively on Regulation O, but was 

designed to identify related party transactions under all applicable rules, including ASC 850 and 

Rule 9-03. 

 

46. As a result of this improved process, Eagle identified additional related party loans, 

including loans to an entity in which a director was a trustee, loans to an entity in which a director 

had an ownership interest exceeding 10%, and loans to an entity in which a director’s son had an 

ownership interest exceeding 10%. 

 

47. In its 2018 annual report, filed on March 1, 2019, Eagle included the Trust Loans, 

as well as loans identified as a result of its process improvements, in its related party loan balances.  

Eagle disclosed an increase in the outstanding related party loan balances to $238 million as of 

December 31, 2017, from a previously-reported balance of $61 million, and to $138 million as of 

December 31, 2016, from a previously-reported balance of $53 million. 

 

Eagle’s False Books and Records and Inadequate Internal Controls 

 

48. During the relevant period, Eagle’s books and records understated its related party 

loan balances for the reasons discussed above.  Furthermore, during the relevant period, Eagle’s 

internal controls were insufficient to prevent these misstatements.  Specifically, Eagle’s process for 

identifying related party loans relied on the wrong definition of “related party” – Regulation O 

instead of ASC 850 and Rule 9-03 – and heavily and unreasonably relied on Eagle’s officers and 

directors understanding and correctly reporting all related parties that met that technical definition. 

 

49. In March 2019, shortly after the filing of its 2018 annual report, Paul retired from 

Eagle, citing health reasons.  As part of the December 31, 2019 audit, Eagle’s independent auditor 

identified a material weakness in Eagle’s internal control over financial reporting “resulting from 

tone at the top issues that contributed to a control environment that was insufficiently tailored to 

the culture of deference afforded to” Paul.  Subsequently, as part of the December 31, 2020 audit, 

Eagle’s independent auditor found that “[a]s of December 31, 2020, the enhanced controls are 

operating effectively and the deficiencies that contributed to the Material Weakness [identified in 

the 2019 audit] have been fully and effectively remediated.” 

 



 11 

Violations 

 

50. As a result of the conduct described above, Eagle violated Sections 17(a)(2) and 

17(a)(3) of the Securities Act, which prohibit any person from directly or indirectly obtaining 

money or property by means of any untrue statement of material fact or any omission to state a 

material fact necessary in order to make the statements made, in light of the circumstances under 

which they are made, not misleading, or engaging in any transaction, practice, or course of 

business which operates or would operate as a fraud or deceit upon the purchaser, in the offer or 

sale of securities.  A violation of these provisions does not require scienter and may rest on a 

finding of negligence. 

 

51. As a result of the conduct described above, Eagle violated Section 13(a) of the 

Exchange Act and Rule 13a-1 thereunder, which require issuers with securities registered under 

Section 12 of the Exchange Act to file annual, current, and quarterly reports with the Commission 

containing such information as the Commission’s rules may require.  Eagle also violated Rule 12b-

20 of the Exchange Act, which requires an issuer to include in a statement or report filed with the 

Commission any information necessary to make the required statements in the filing not materially 

misleading.  A violation of these reporting provisions does not require scienter. 

 

52. As a result of the conduct described above, Eagle violated Section 13(b)(2)(A) of 

the Exchange Act, which requires issuers with securities registered under Section 12 of the 

Exchange Act to make and keep books, records, and accounts which, in reasonable detail, 

accurately and fairly reflect the transactions and dispositions of assets of the issuer.  Scienter is not 

an element of the books and records provision.  

 

53. As a result of the conduct described above, Eagle violated Section 13(b)(2)(B) of 

the Exchange Act, which requires issuers with securities registered under Section 12 of the 

Exchange Act to devise and maintain a system of internal accounting controls sufficient to provide 

reasonable assurance that, among other things, transactions are recorded as necessary to permit 

preparation of financial statements in conformity with GAAP.  Scienter is not an element of the 

internal accounting control provisions. 

 

54. As a result of the conduct described above, Eagle violated Section 14(a) of the 

Exchange Act and Rule 14a-9 thereunder.  Section 14(a) of the Exchange Act makes it unlawful to 

solicit any proxy in respect of securities registered under Section 12 of the Exchange Act in 

contravention of such rules and regulations as the Commission may prescribe.  Rule 14a-9 

prohibits the use of proxy statements containing materially false or misleading statements or 

materially misleading omissions.  No showing of scienter is required to establish a violation of 

Section 14(a) of the Exchange Act or Rule 14a-9 thereunder.  

 

Disgorgement and Civil Penalties 

 

The disgorgement and prejudgment interest ordered in paragraph IV.B, infra, is 

consistent with equitable principles and does not exceed Respondent’s net profits from its 

violations and will be distributed to harmed investors to the extent feasible.  The Commission 



 12 

will hold funds paid pursuant to paragraph IV.B in an account at the United States Treasury 

pending distribution.  Upon approval of the distribution final accounting by the Commission, any 

amounts remaining that are infeasible to return to investors, and any amounts returned to the 

Commission in the future that are infeasible to return to investors, may be transferred to the 

general fund of the U.S. Treasury, subject to Section 21F(g)(3) of the Exchange Act. 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Eagle’s Offer. 

 

 Accordingly, pursuant to Sections 8A of the Securities Act and Section 21C of the 

Exchange Act, it is hereby ORDERED that: 

 

 A. Respondent Eagle cease and desist from committing or causing any violations and 

any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections 13(a), 

13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Exchange Act, and Rules 12b-20, 13a-1, and 14a-9 

thereunder. 

 

B. Respondent Eagle shall, within 10 days of the entry of this Order, pay disgorgement 

of $2,600,000, prejudgment interest of $750,493, and a civil money penalty in the amount of 

$10,000,000 to the Securities and Exchange Commission.  If timely payment of disgorgement and 

prejudgment interest is not made, additional interest shall accrue pursuant to SEC Rule of Practice 

600, and, if timely payment of a civil money penalty is not made, additional interest shall accrue 

pursuant to 31 U.S.C. § 3717. 

 

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

http://www.sec.gov/about/offices/ofm.htm


 13 

Payments by check or money order must be accompanied by a cover letter identifying Eagle as a 

Respondent in these proceedings, and the file number of these proceedings; a copy of the cover 

letter and check or money order must be sent to Kevin Guerrero, Assistant Director, Division of 

Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.   

 

 C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 

created for the disgorgement, prejudgment interest, and penalties referenced in paragraph IV.B 

above.  This Fair Fund may be combined with any fund established for the benefit of harmed 

investors in SEC v. Ronald D. Paul, 22-cv-06985 (S.D.N.Y.).  Amounts ordered to be paid as civil 

money penalties pursuant to this Order shall be treated as penalties paid to the government for all 

purposes, including all tax purposes.  To preserve the deterrent effect of the civil penalty, 

Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor 

shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any 

part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  If the court in 

any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 

days after entry of a final order granting the Penalty Offset, notify the Commission’s counsel in 

this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission.  

Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change 

the amount of the civil penalty imposed in this proceeding.  For purposes of this paragraph, a 

“Related Investor Action” means a private damages action brought against Respondent by or on 

behalf of one or more investors based on substantially the same facts as alleged in the Order 

instituted by the Commission in this proceeding. 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary