SEC v. Ronald D. Paul, No. 1:22-cv-06985, Southern District of New York (Aug. 17, 2022) — Complaint

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

_____________________________________________
                                                                                          :
SECURITIES AND EXCHANGE COMMISSION,   :
 :      22-CV-__________ ( )
                                                             Plaintiff,                                                             :
                                                                                                                                                                                       :
                       -against-                                                                      :                                                                     COMPLAINT
                                                                  :
RONALD D. PAUL   :
                                                                  :
                                                                  :
                                            Defendant                                            :
_____________________________________________:

Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against
Defendant Ronald D. Paul (“Paul”) alleges as follows:
SUMMARY
1. This matter concerns material misstatements and omissions by Eagle Bancorp,
Inc. (“Eagle”), a Bethesda, Maryland-based bank holding company, and its former Chairman and
CEO, Paul, about related party loans extended by Eagle’s principal subsidiary, EagleBank, to
family trusts affiliated with Paul.
2. From March 2015 through April 2018, Eagle failed to include these loans in the
related party loan balances disclosed in its annual reports and proxy statements filed with the
SEC.  Paul signed the annual reports and solicited the proxy statements.  Both SEC 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.

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3. In December 2017, a short seller released a report that alleged, among other
things, that Eagle had significant undisclosed related party loans.  Eagle publicly asserted that
those loans were not related party loans and that Eagle had complied with all related party loan
requirements.  Contrary to these statements, certain loans, which should have been disclosed as
related party loans by Eagle, were not.
4. In its 2017 annual report, filed with the SEC on March 1, 2018 and signed by
Paul, Eagle negligently 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 officer and director,” it stated that those loans were not related party
loans when in fact they were.  In its proxy statement filed April 3, 2018 and solicited by Paul,
Eagle repeated these inaccurate disclosures.
5. In its 2018 annual report, filed with the SEC on March 1, 2019, Eagle finally
disclosed the loans to Paul’s family trusts in its related party loan balances, and also reported
other, previously-undisclosed related party loans to Eagle directors and their families.
6. 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 $138
million as of December 31, 2016, from a previously-reported balance of $53 million. This
increase resulted primarily from inclusion of the loans to Paul’s family trusts—approximately
$90 million as of December 31, 2017 and $73 million as of December 31, 2016.
7. In acting in his corporate capacity as CEO, Chairman and President of Eagle, Paul
negligently failed to ensure that Eagle properly disclosed these related party loans in its filings
and statements.  Moreover, Eagle failed to maintain the appropriate internal processes to prevent
such a disclosure failure.  In his senior position at Eagle, Paul was also liable for these failures.

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8. By engaging in the conduct described herein, Paul violated, and unless restrained
or enjoined by the Court, will continue to violate Sections 17(a)(2) and/or 17(a)(3) of the
Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)(2) and (3)], Section 14(a) of the
Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78n(a)] and Rules 13a-14 and
14a-9 thereunder [17 C.F.R. §§ 240.13a-14 and 14a-9].  The SEC therefore seeks a judgment
against Paul providing permanent injunctive relief, ordering disgorgement, plus prejudgment
interest, and civil money penalties, and barring Paul from serving as an officer or director of a
public company for two years.
JURISDICTION AND VENUE
9. The SEC brings this action, and this Court has jurisdiction, pursuant to Sections
20 and 22 of the Securities Act [15 U.S.C. §§ 77t and 77v] and Sections 21 and 27 of the
Exchange Act [15 U.S.C. §§ 78u and 78aa].
10. Venue is proper in this district pursuant to Section 22(a) of the Securities Act [15
U.S.C. § 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d),
78(e), and 78aa].
11. Paul’s conduct took place in connection with the offer and/or sale of Eagle
securities.  During the relevant period, Eagle’s common stock was publicly traded on the
NASDAQ stock exchange, located in the Southern District of New York. In addition, during the
relevant period, Paul met with Eagle investors and analysts in this district.
12. Paul, directly or indirectly, made use of means or instrumentalities of interstate
commerce or the mails, or the facilities of a national securities exchange, in connection with the
conduct alleged herein.

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DEFENDANT
13. Paul, age 66, resides in Potomac, Maryland.  A founder of EagleBank, Paul
served as the President and CEO of Eagle from its organization in 1997 until his retirement in
March 2019, and Chairman of the Board of Directors of Eagle from May 2008 until March 2019.
Paul also served as Chairman of the Board of Directors of EagleBank from its inception to
March 2019, and CEO of EagleBank from June 2006 to March 2019.
OTHER RELEVANT ENTITIES
14. Eagle, a Maryland corporation with its principal place of business in Bethesda,
Maryland, is a bank holding company for EagleBank.  Shares of Eagle’s common stock are
registered with the SEC pursuant to Section 12(b) of the Exchange Act and trade on the
NASDAQ Capital Market under the ticker symbol “EGBN.”  During the relevant period, Eagle
sold securities to the public pursuant to registration statements filed with the SEC.
FACTUAL ALLEGATIONS
I. EAGLE’S RELATED PARTY LOAN DISCLOSURES
15. 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.”
16. 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

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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.”
17. 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
nephews (“Trusts”), and entities in which the Trusts had a 10% or greater ownership interest
(“Trust Loans”).
18. The Trust Loans were related party loans under ASC 850, and the Trust Loans
were required to be disclosed under Rule 9-03.
II. EAGLE FAILED TO PROPERLY CLASSIFY THE LOANS
AS RELATED PARTY TRANSACTIONS
19. Before March 2019, Eagle identified and reported related party loans in its 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.
20. Prior to March 2019, Eagle had no separate process for identifying and reporting
related party loans under ASC 850 and Rule 9-03.  Instead, Eagle only analyzed whether loans
met the definition of Regulation O.  Nevertheless, under any of these rules, Eagle should have
classified the Trust Loans as related party loans.

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21. 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 filed
with the Commission in 2015 through 2017.
22. Each year, Paul signed a management representation letter to Eagle’s independent
auditor, stating that Eagle had made available “the names of all related parties and all
relationships and transactions with related parties.”
III. EAGLE NEGLIGENTLY FAILED TO PROPERLY DISCLOSE ITS RELATED
PARTY LOAN BALANCE IN ANNUAL REPORTS AND PROXY STATEMENTS
FILED IN 2015-2017

23. 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.
24. In its 2014 annual report, filed on March 2, 2015, Eagle reported total related
party loan balances of $17.1 million as of December 31, 2014.  In doing so, Eagle failed to
include approximately $24.8 million of Trust Loans.
25. 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 of $29.9
million as of December 31, 2015.  In doing so, Eagle failed to include approximately $37.3
million of Trust Loans.
26. 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 of $52.6 million as of
December 31, 2016.  In doing so, Eagle failed to include approximately $72.7 million of Trust
Loans.

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27. Paul was a member of Eagle’s Disclosure Controls Committee, which approved
each annual report and proxy statement filed with the SEC.  Paul signed each of the annual
reports, and the accompanying certifications required under the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley”).  Paul solicited the proxy statements during the relevant period.
IV. THE DECEMBER 2017 SHORT SELLER REPORT
28. On December 1, 2017, a short-selling research firm published a report alleging,
among other things, that Eagle had failed to properly disclose its related party loan balance.  This
report publicly raised the issue of Eagle’s related party loan balances.
29. 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.
30. On the same day that the short seller’s report was published and after the market
was closed, Eagle issued a press release, which Paul reviewed and approved, subsequently filed
with the Commission on Form 8-K, titled, “Eagle Bancorp, Inc. Denies Allegations In Deceptive
and Misleading Report.”  Among other things, the press release claimed that Eagle had properly
disclosed its related party loans balance.
31. Two days later, on Sunday, December 3, 2017, Eagle issued another press release,
which Paul reviewed and approved, and subsequently filed with the Commission on Form 8-K.
This release was entitled “Eagle Bancorp Rebuts Claims of Internal Control Weaknesses and
Alerts Shareholders and Customers to be Wary of Unscrupulous Short Seller Tactics.”  Among
other things, this press release claimed that Eagle’s related party loan balance had been properly
disclosed and that Eagle complied with all disclosure and internal controls requirements
regarding related party loan balances.

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32. Numerous investors and analysts contacted Eagle to inquire as to the accuracy of
the allegations in the report.  Among other things, they asked about the amount of Eagle’s
Regulation O or related party loans and whether the Trust Loans should be classified as such.
Eagle asserted that its related party loan disclosures were complete.
33. For the reasons described above in Section III, contrary to the representations that
Eagle made to investors and analysts after the short seller report was issued, Eagle’s related party
loan disclosures from 2015 through 2017 were inaccurate and misleading.
34. 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.  Paul, as
Eagle’s CEO, Chairman, and President had a fiduciary duty to Eagle and its shareholders to
ensure that Eagle properly disclosed its related party loan balance.  He negligently failed to do
so.
V. EAGLE’S 2017 ANNUAL REPORT AND 2018 PROXY STATEMENT
CONTAINED MATERIAL MISSTATEMENTS AND OMISSIONS

35. 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.  Eagle should have included, but did
not include, approximately $89.6 million of Trust Loans.
36. 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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37. This description was inaccurate because the Trust Loans were related party
transactions.  Paul signed Eagle’s 2017 10-K and the accompanying Sarbanes-Oxley
certification.
38. On March 2, 2018, the day after Eagle filed its 2017 annual report, Eagle began
treating at least some of the Trust Loans as related party loans in its internal systems.  Despite
this internal reclassification of the Trust Loans as related party loans, Eagle’s 2018 proxy
statement, filed on April 3, 2018, and solicited by Paul, did not disclose the Trust Loans as such
to the investing public.
VI. IN ITS 2018 ANNUAL REPORT, EAGLE DISCLOSED
REVISED RELATED PARTY LOAN BALANCES

39. Before filing its 2018 annual report, Eagle developed a new, enhanced process to
identify and disclose all related party transactions in its financial statements and filings with the
SEC.  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.  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%.
40. In its 2018 annual report, filed on March 1, 2019, Eagle included the Trust Loans,
as well as other loans identified as a result of its process improvements, in its related party loan
balances.  Eagle disclosed an increase in the outstanding reported 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.

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41. The increase in Eagle’s related party loan balances resulted primarily from
inclusion of the Trust Loan balances—approximately $90 million as of December 31, 2017 and
$73 million as of December 31, 2016.
42. During the relevant period, Eagle’s books and records understated its related party
loan balances for the reasons discussed above.  As such, Eagle’s internal controls were
insufficient to prevent these misstatements regarding related party loan balances.  As CEO,
President, and Chairman of Eagle, it was Paul’s responsibility to ensure such controls were in
place.  In this case, any controls in place to prevent an improper or incomplete disclosure of
related party loans failed.
VII.     PAUL’S STOCK SALES IN THE RELEVANT PERIOD
43. Between October 25, 2017 and November 3, 2017, Paul sold 50,000 shares of
Eagle stock at an average price of $67.13 per share, for total proceeds of approximately $3.35
million.
FIRST CLAIM FOR RELIEF
Violations of Sections 17(a)(2) and/or 17(a)(3) of the Securities Act
44. The SEC realleges and incorporates by reference herein each and every allegation
contained in paragraphs 1 through 43, as if fully set forth herein.
45. By engaging in the conduct described above, Defendant Paul, directly or
indirectly, singly or in concert, in the offer or sale of securities and by the use of the means or
instruments of transportation or communication in interstate commerce or by use of the mails
has: (2) obtained money or property by means of untrue statements of a material fact or
omissions of a material fact necessary in order to make the statement made, in light of the
circumstances under which they were made, not misleading; and/or (3) engaged in transactions,

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practices, or courses of business which operated or would operate as a fraud or deceit upon
purchasers of securities upon other persons.
46. By engaging in the foregoing, Defendant Paul violated, and unless restrained and
enjoined, will continue violating Sections 17(a)(2) and/or 17(a)(3) of the Securities Act [15
U.S.C. §§ 77q(a)(2) and 77q(a)(3)].
SECOND CLAIM FOR RELIEF
Violations of Sections 14(a) and Rule 14a-9 of the Exchange Act
47. The SEC realleges and incorporates by reference herein each and every allegation
contained in paragraphs 1 through 43, as if fully set forth herein.
48. By engaging in the conduct described above, Defendant Paul directly or
indirectly, by use of mails, or the means or instrumentalities of interstate commerce or any
facility of a national securities exchange, or otherwise, in contravention of Rule 14a-9 of the
Exchange Act, solicited or permitted the use of their names to solicit proxies, consents, or
authorizations in respect of non-exempt securities registered with the SEC pursuant to Section 12
of the Exchange Act [15 U.S.C. § 78l], by means of a proxy statement, form of proxy statement,
notice of meeting and other communications that contained statements, which, at the time and in
the light of the circumstances under which they were made, were false and misleading with
respect to material facts or which omitted to state material facts necessary in order to make the
statements made therein not false or misleading or necessary to correct statements in earlier
communications with respect to the solicitation of a proxy for the same meeting or subject matter
which became false or misleading.
49. By engaging in the foregoing conduct, Paul violated and, unless restrained and
enjoined, will continue violating Section 14(a) of the Exchange Act [15 U.S.C. § 78n(a)] and
Rule 14a-9 thereunder [17 C.F.R. § 240.14a-9].

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THIRD CLAIM FOR RELIEF
Violations of Rule 13a-14 of the Exchange Act
50. The SEC realleges and incorporates by reference herein each and every allegation
contained in paragraphs 1 through 43, as if fully set forth herein.
51. Rule 13a-14 of the Exchange Act [17 C.F.R. §240.13a-14] requires that each
principal officer of an issuer, at the time of the filing of a report, must sign a certification
averring, among other things, that the report does not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which statements were made not misleading with respect to the period
covered by this report, and as to the company’s controls over financial reporting.
52. As a principal officer of Eagle, Defendant Paul signed certifications included in
Eagle’s annual reports filed on Form 10-K for the years ending December 31, 2014, December
31, 2015, December 31, 2016, and December 31, 2017. These certifications were materially false
and misleading.
53. By engaging in the foregoing conduct, Defendant Paul violated and, unless
restrained and enjoined, will continue violating Rule 13a-14 of the Exchange Act [17 C.F.R. §
240.13a-14].
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that this Court enter a Final Judgment:
a) finding the Defendant violated the federal securities laws and rules promulgated
thereunder as alleged against him herein in this Complaint;
b) permanently restraining and enjoining the Defendant and his agents, servants,
employees and attorneys and all persons in active concert who receive actual notice

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of the injunction and each of them from, directly or indirectly, violating or aiding and
abetting violations of the federal securities laws alleged in this Complaint;
c) ordering the Defendant to pay disgorgement of certain amounts and to pay
prejudgment interest on those amounts;
d) ordering the Defendant to pay civil monetary penalties pursuant to Section 20(d) of
the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15
U.S.C. § 78u(d)(3)];
e) barring the Defendant from acting as an officer or director of any public company for
a period of two years pursuant to Section 20(e) of the Securities Act [15 U.S.C. §
77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and
f) granting such other and further relief as this Court may deem just and proper.

 Respectfully submitted,

 By: /s/ Derek Bentsen
       Derek Bentsen (DB8369)
                                                                                    Securities            and            Exchange            Commission
                                                                                    100            F            St.            NE
                                                                                    Washington,            D.C.            20549
                                                                                    Phone:                        (202)            551-6426

Of Counsel:
Frederick L. Block / (202) 551-4919
James M. Carlson / (202) 551-3711
Kevin Guerrero / (202) 551-4401
Emily Shea / (202) 551-8626
Securities            and            Exchange            Commission
100 F St. NE
Washington, D.C. 20549

Dated:  August 16, 2022

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UNITED STATES DISTRICT COURT  
SOUTHERN DISTRICT OF NEW YORK  
 
_____________________________________________  
 : 
SECURITIES AND EXCHANGE COMMISSION,  :  
 :  22-CV-__________ ( )  
 Plaintiff, : 
   :  
 -against-   :   COMPLAINT  
   :  
RONALD D. PAUL   : 
   : 
   : 
  Defendant  : 
_____________________________________________: 
  
 

Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against 

Defendant Ronald D. Paul (“Paul”) alleges as follows:  

SUMMARY 

1. This matter concerns material misstatements and omissions by Eagle Bancorp, 

Inc. (“Eagle”), a Bethesda, Maryland-based bank holding company, and its former Chairman and 

CEO, Paul, about related party loans extended by Eagle’s principal subsidiary, EagleBank, to 

family trusts affiliated with Paul.   

2. From March 2015 through April 2018, Eagle failed to include these loans in the 

related party loan balances disclosed in its annual reports and proxy statements filed with the 

SEC.  Paul signed the annual reports and solicited the proxy statements.  Both SEC 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. 

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3. In December 2017, a short seller released a report that alleged, among other 

things, that Eagle had significant undisclosed related party loans.  Eagle publicly asserted that 

those loans were not related party loans and that Eagle had complied with all related party loan 

requirements.  Contrary to these statements, certain loans, which should have been disclosed as 

related party loans by Eagle, were not. 

4. In its 2017 annual report, filed with the SEC on March 1, 2018 and signed by 

Paul, Eagle negligently 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 officer and director,” it stated that those loans were not related party 

loans when in fact they were.  In its proxy statement filed April 3, 2018 and solicited by Paul, 

Eagle repeated these inaccurate disclosures. 

5. In its 2018 annual report, filed with the SEC on March 1, 2019, Eagle finally 

disclosed the loans to Paul’s family trusts in its related party loan balances, and also reported 

other, previously-undisclosed related party loans to Eagle directors and their families.  

6. 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 $138 

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

increase resulted primarily from inclusion of the loans to Paul’s family trusts—approximately 

$90 million as of December 31, 2017 and $73 million as of December 31, 2016.  

7. In acting in his corporate capacity as CEO, Chairman and President of Eagle, Paul 

negligently failed to ensure that Eagle properly disclosed these related party loans in its filings 

and statements.  Moreover, Eagle failed to maintain the appropriate internal processes to prevent 

such a disclosure failure.  In his senior position at Eagle, Paul was also liable for these failures.  

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8. By engaging in the conduct described herein, Paul violated, and unless restrained 

or enjoined by the Court, will continue to violate Sections 17(a)(2) and/or 17(a)(3) of the 

Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)(2) and (3)], Section 14(a) of the 

Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78n(a)] and Rules 13a-14 and 

14a-9 thereunder [17 C.F.R. §§ 240.13a-14 and 14a-9].  The SEC therefore seeks a judgment 

against Paul providing permanent injunctive relief, ordering disgorgement, plus prejudgment 

interest, and civil money penalties, and barring Paul from serving as an officer or director of a 

public company for two years.  

JURISDICTION AND VENUE 

9. The SEC brings this action, and this Court has jurisdiction, pursuant to Sections 

20 and 22 of the Securities Act [15 U.S.C. §§ 77t and 77v] and Sections 21 and 27 of the 

Exchange Act [15 U.S.C. §§ 78u and 78aa].  

10. Venue is proper in this district pursuant to Section 22(a) of the Securities Act [15 

U.S.C. § 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 

78(e), and 78aa].  

11. Paul’s conduct took place in connection with the offer and/or sale of Eagle 

securities.  During the relevant period, Eagle’s common stock was publicly traded on the 

NASDAQ stock exchange, located in the Southern District of New York. In addition, during the 

relevant period, Paul met with Eagle investors and analysts in this district.  

12. Paul, directly or indirectly, made use of means or instrumentalities of interstate 

commerce or the mails, or the facilities of a national securities exchange, in connection with the 

conduct alleged herein.  

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DEFENDANT  

13. Paul, age 66, resides in Potomac, Maryland.  A founder of EagleBank, Paul 

served as the President and CEO of Eagle from its organization in 1997 until his retirement in 

March 2019, and Chairman of the Board of Directors of Eagle from May 2008 until March 2019.  

Paul also served as Chairman of the Board of Directors of EagleBank from its inception to 

March 2019, and CEO of EagleBank from June 2006 to March 2019.  

OTHER RELEVANT ENTITIES  

14. Eagle, a Maryland corporation with its principal place of business in Bethesda, 

Maryland, is a bank holding company for EagleBank.  Shares of Eagle’s common stock are 

registered with the SEC pursuant to Section 12(b) of the Exchange Act and trade on the 

NASDAQ Capital Market under the ticker symbol “EGBN.”  During the relevant period, Eagle 

sold securities to the public pursuant to registration statements filed with the SEC.  

FACTUAL ALLEGATIONS  

I. EAGLE’S RELATED PARTY LOAN DISCLOSURES  

15. 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.”  

16. 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 

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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.”  

17. 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 

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

(“Trust Loans”).  

18. The Trust Loans were related party loans under ASC 850, and the Trust Loans 

were required to be disclosed under Rule 9-03.   

II. EAGLE FAILED TO PROPERLY CLASSIFY THE LOANS 
AS RELATED PARTY TRANSACTIONS  

19. Before March 2019, Eagle identified and reported related party loans in its 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. 

20. Prior to March 2019, Eagle had no separate process for identifying and reporting 

related party loans under ASC 850 and Rule 9-03.  Instead, Eagle only analyzed whether loans 

met the definition of Regulation O.  Nevertheless, under any of these rules, Eagle should have 

classified the Trust Loans as related party loans.  

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21. 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 filed 

with the Commission in 2015 through 2017. 

22. Each year, Paul signed a management representation letter to Eagle’s independent 

auditor, stating that Eagle had made available “the names of all related parties and all 

relationships and transactions with related parties.” 

III. EAGLE NEGLIGENTLY FAILED TO PROPERLY DISCLOSE ITS RELATED 
PARTY LOAN BALANCE IN ANNUAL REPORTS AND PROXY STATEMENTS 
FILED IN 2015-2017 

  
23. 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. 

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

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

include approximately $24.8 million of Trust Loans. 

25. 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 of $29.9 

million as of December 31, 2015.  In doing so, Eagle failed to include approximately $37.3 

million of Trust Loans.  

26. 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 of $52.6 million as of 

December 31, 2016.  In doing so, Eagle failed to include approximately $72.7 million of Trust 

Loans.  

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27. Paul was a member of Eagle’s Disclosure Controls Committee, which approved 

each annual report and proxy statement filed with the SEC.  Paul signed each of the annual 

reports, and the accompanying certifications required under the Sarbanes-Oxley Act of 2002 

(“Sarbanes-Oxley”).  Paul solicited the proxy statements during the relevant period. 

IV. THE DECEMBER 2017 SHORT SELLER REPORT 

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

among other things, that Eagle had failed to properly disclose its related party loan balance.  This 

report publicly raised the issue of Eagle’s related party loan balances. 

29. 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. 

30. On the same day that the short seller’s report was published and after the market 

was closed, Eagle issued a press release, which Paul reviewed and approved, subsequently filed 

with the Commission on Form 8-K, titled, “Eagle Bancorp, Inc. Denies Allegations In Deceptive 

and Misleading Report.”  Among other things, the press release claimed that Eagle had properly 

disclosed its related party loans balance. 

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

which Paul reviewed and approved, and subsequently filed with the Commission on Form 8-K.  

This release was entitled “Eagle Bancorp Rebuts Claims of Internal Control Weaknesses and 

Alerts Shareholders and Customers to be Wary of Unscrupulous Short Seller Tactics.”  Among 

other things, this press release claimed that Eagle’s related party loan balance had been properly 

disclosed and that Eagle complied with all disclosure and internal controls requirements 

regarding related party loan balances.   

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32. Numerous investors and analysts contacted Eagle to inquire as to the accuracy of 

the allegations in the report.  Among other things, they asked about the amount of Eagle’s 

Regulation O or related party loans and whether the Trust Loans should be classified as such.  

Eagle asserted that its related party loan disclosures were complete.   

33. For the reasons described above in Section III, contrary to the representations that 

Eagle made to investors and analysts after the short seller report was issued, Eagle’s related party 

loan disclosures from 2015 through 2017 were inaccurate and misleading.  

34. 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.  Paul, as 

Eagle’s CEO, Chairman, and President had a fiduciary duty to Eagle and its shareholders to 

ensure that Eagle properly disclosed its related party loan balance.  He negligently failed to do 

so. 

V. EAGLE’S 2017 ANNUAL REPORT AND 2018 PROXY STATEMENT 
CONTAINED MATERIAL MISSTATEMENTS AND OMISSIONS 

 
35. 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.  Eagle should have included, but did 

not include, approximately $89.6 million of Trust Loans.  

36. 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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37. This description was inaccurate because the Trust Loans were related party 

transactions.  Paul signed Eagle’s 2017 10-K and the accompanying Sarbanes-Oxley 

certification. 

38. On March 2, 2018, the day after Eagle filed its 2017 annual report, Eagle began 

treating at least some of the Trust Loans as related party loans in its internal systems.  Despite 

this internal reclassification of the Trust Loans as related party loans, Eagle’s 2018 proxy 

statement, filed on April 3, 2018, and solicited by Paul, did not disclose the Trust Loans as such 

to the investing public. 

VI. IN ITS 2018 ANNUAL REPORT, EAGLE DISCLOSED 
REVISED RELATED PARTY LOAN BALANCES  

 
39. Before filing its 2018 annual report, Eagle developed a new, enhanced process to 

identify and disclose all related party transactions in its financial statements and filings with the 

SEC.  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.  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%.  

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

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

balances.  Eagle disclosed an increase in the outstanding reported 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.  

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41. The increase in Eagle’s related party loan balances resulted primarily from 

inclusion of the Trust Loan balances—approximately $90 million as of December 31, 2017 and 

$73 million as of December 31, 2016.  

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

loan balances for the reasons discussed above.  As such, Eagle’s internal controls were 

insufficient to prevent these misstatements regarding related party loan balances.  As CEO, 

President, and Chairman of Eagle, it was Paul’s responsibility to ensure such controls were in 

place.  In this case, any controls in place to prevent an improper or incomplete disclosure of 

related party loans failed.   

VII. PAUL’S STOCK SALES IN THE RELEVANT PERIOD 

43. Between October 25, 2017 and November 3, 2017, Paul sold 50,000 shares of 

Eagle stock at an average price of $67.13 per share, for total proceeds of approximately $3.35 

million. 

FIRST CLAIM FOR RELIEF 
Violations of Sections 17(a)(2) and/or 17(a)(3) of the Securities Act  

44. The SEC realleges and incorporates by reference herein each and every allegation 

contained in paragraphs 1 through 43, as if fully set forth herein.  

45. By engaging in the conduct described above, Defendant Paul, directly or 

indirectly, singly or in concert, in the offer or sale of securities and by the use of the means or 

instruments of transportation or communication in interstate commerce or by use of the mails 

has: (2) obtained money or property by means of untrue statements of a material fact or 

omissions of a material fact necessary in order to make the statement made, in light of the 

circumstances under which they were made, not misleading; and/or (3) engaged in transactions, 

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practices, or courses of business which operated or would operate as a fraud or deceit upon 

purchasers of securities upon other persons.  

46. By engaging in the foregoing, Defendant Paul violated, and unless restrained and 

enjoined, will continue violating Sections 17(a)(2) and/or 17(a)(3) of the Securities Act [15 

U.S.C. §§ 77q(a)(2) and 77q(a)(3)]. 

SECOND CLAIM FOR RELIEF  
Violations of Sections 14(a) and Rule 14a-9 of the Exchange Act 

47. The SEC realleges and incorporates by reference herein each and every allegation 

contained in paragraphs 1 through 43, as if fully set forth herein.  

48. By engaging in the conduct described above, Defendant Paul directly or 

indirectly, by use of mails, or the means or instrumentalities of interstate commerce or any 

facility of a national securities exchange, or otherwise, in contravention of Rule 14a-9 of the 

Exchange Act, solicited or permitted the use of their names to solicit proxies, consents, or 

authorizations in respect of non-exempt securities registered with the SEC pursuant to Section 12 

of the Exchange Act [15 U.S.C. § 78l], by means of a proxy statement, form of proxy statement, 

notice of meeting and other communications that contained statements, which, at the time and in 

the light of the circumstances under which they were made, were false and misleading with 

respect to material facts or which omitted to state material facts necessary in order to make the 

statements made therein not false or misleading or necessary to correct statements in earlier 

communications with respect to the solicitation of a proxy for the same meeting or subject matter 

which became false or misleading.  

49. By engaging in the foregoing conduct, Paul violated and, unless restrained and 

enjoined, will continue violating Section 14(a) of the Exchange Act [15 U.S.C. § 78n(a)] and 

Rule 14a-9 thereunder [17 C.F.R. § 240.14a-9]. 

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THIRD CLAIM FOR RELIEF 
Violations of Rule 13a-14 of the Exchange Act 

50. The SEC realleges and incorporates by reference herein each and every allegation 

contained in paragraphs 1 through 43, as if fully set forth herein.  

51. Rule 13a-14 of the Exchange Act [17 C.F.R. §240.13a-14] requires that each 

principal officer of an issuer, at the time of the filing of a report, must sign a certification 

averring, among other things, that the report does not contain any untrue statement of material 

fact or omit to state a material fact necessary to make the statements made, in light of the 

circumstances under which statements were made not misleading with respect to the period 

covered by this report, and as to the company’s controls over financial reporting.  

52. As a principal officer of Eagle, Defendant Paul signed certifications included in 

Eagle’s annual reports filed on Form 10-K for the years ending December 31, 2014, December 

31, 2015, December 31, 2016, and December 31, 2017. These certifications were materially false 

and misleading. 

53. By engaging in the foregoing conduct, Defendant Paul violated and, unless 

restrained and enjoined, will continue violating Rule 13a-14 of the Exchange Act [17 C.F.R. § 

240.13a-14]. 

PRAYER FOR RELIEF  

WHEREFORE, the SEC respectfully requests that this Court enter a Final Judgment:  

a) finding the Defendant violated the federal securities laws and rules promulgated 

thereunder as alleged against him herein in this Complaint;  

b) permanently restraining and enjoining the Defendant and his agents, servants, 

employees and attorneys and all persons in active concert who receive actual notice 

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of the injunction and each of them from, directly or indirectly, violating or aiding and 

abetting violations of the federal securities laws alleged in this Complaint;  

c) ordering the Defendant to pay disgorgement of certain amounts and to pay 

prejudgment interest on those amounts;  

d) ordering the Defendant to pay civil monetary penalties pursuant to Section 20(d) of 

the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 

U.S.C. § 78u(d)(3)];  

e) barring the Defendant from acting as an officer or director of any public company for 

a period of two years pursuant to Section 20(e) of the Securities Act [15 U.S.C. § 

77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and  

f) granting such other and further relief as this Court may deem just and proper. 
 
 
 Respectfully submitted,  
 
 
 By: /s/ Derek Bentsen     
       Derek Bentsen (DB8369) 
       Securities and Exchange Commission  
       100 F St. NE 
       Washington, D.C. 20549 
       Phone:  (202) 551-6426 
 
Of Counsel: 
Frederick L. Block / (202) 551-4919 
James M. Carlson / (202) 551-3711 
Kevin Guerrero / (202) 551-4401 
Emily Shea / (202) 551-8626 
Securities and Exchange Commission         
100 F St. NE 
Washington, D.C. 20549 
 
Dated:  August 16, 2022 
 

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