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March 3, 2018

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Chinese-American banker targeted in financial crisis wins

IT’S rare to see a single lawsuit spotlight David vs Goliath, potential discrimination, and financial crisis altogether, on top of being five years in time and US$10 million in cost.

But Thomas Sung’s Chinatown Abacus Federal Savings Bank vs New York Manhattan District Attorney is exactly like that.

With the documentary of the lawsuit — “Abacus: Small Enough to Jail” — nominated for this year’s Oscars, Sung’s story got more attention across the globe.

Sung, 83, laughes warmly at the first question. “Chinese or English? Whichever suits you.”

Sung, who was born in Shanghai, went to the United States at 16 and earned degrees in economics and law before going into real estate investment. He was an immigration lawyer before he founded the Abacus bank in 1984 in Manhattan’s Chinatown.

The goal is to serve the Chinese immigrant community, who had no place to get a loan to buy houses, start up small businesses and build a family.

Sung’s story has so much resemblance to the 1946 classics film “It’s a Wonderful Life” and the beloved character George Bailey.

Just like Bailey’s Building and Loan in Bedford Falls, Abacus has always been a small bank. Growing over the years to six branches, it is nothing compared with those on the Wall Street.

So not many outside the Chinese community knew about Abacus until it became the only US bank ever indicted for mortgage fraud in the 2008 financial crisis, and 13 of its employees were handcuffed, chained up and escorted through a hallway in the Manhattan Criminal Courthouse in a staged perp-walk before the national news media in May 2012.

Sung still feels angry as he recalls that episode. “To bring them to court is one thing; to chain them up in handcuffs is another,” he says.

Many journalists and lawyers observed that nothing like that had happened before, not to any other minorities. “I was very much offended,” Sung says. “This is discrimination.”

Looking back, Sung says the Manhattan District Attorney’s office probably wanted to convict Abacus for fraud, as a way to threaten the big banks and fine them more.

Sung says that in banking, reputation is very important; no bank wants to get involved in civil or criminal cases like fraud.

In Chinese idioms, it’s called “to kill a chicken to terrify the monkeys.” In other words, it’s small enough to jail, too big to fail, Sung adds.

Abacus became the only US financial institution to be indicted in the wake of the financial crisis.

The DA’s choice of Abacus itself was odd, as many observers pointed out. With US$300 million in assets, Abacus made only plain-vanilla housing loans requiring downpayments of at least 20 percent.

It never offered subprime residential mortgages. Nor did the bank dabble in mortgage derivatives — the complex financial instruments that blew up in the housing crisis and caused so many banks to require bailouts.

However, the DA's office probably shouldn’t have picked on Abacus to set an example — if Sung is right about its plan.

Abacus and the Sung family are not an easy target at all. Even today, Sung is still able to explain the complicated legal process clearly, speaking with clarity and confidence that only a lawyer has.

Both Jill Sung and Vera Sung, daughters of Thomas Sung, who serve as CEO and director of Abacus respectively, had graduated from law schools. It was Vera Sung who caught one employee in the middle of fabricating loan application.

Thomas Sung says the lawsuit against Abacus had more implications. “It threatened the community as a whole. It attacked the Chinese way of conducting business.”

Living a culture based on cash transactions, immigrants in Chinatown usually lack credit history. But running successful businesses like full-house restaurants, they regularly earn enough money in cash for Abacus to give them loans.

In fact, Sung says, not just the Chinese, all immigrants lean heavily on cash. “You can’t single out Chinese and say they are bad.”

For many, the lawsuit has become a quest to seek a voice for the minority, not just for the innocent. For Sung, although he understood from the beginning that the government had much more resources than ordinary people do, he never thought of giving up.

“I’m willing to sacrifice and fight. It is a mission always in mind,” he says.

Every year, Sung and his wife spend winter in Florida. But in 2015, they didn’t go. It was about time for the lawsuit to wrap up.

Back then, no one had 100 percent of confidence that the Sung family could win. After all, there were more than 200 items of indictments, and Abacus had to be “Not Guilty” for every one of them.

On June 4, 2015, after several rounds of discussions and delays, the jury finally decided Abacus was not guilty. When Sung read the daily paper the next day, as shown in the documentary film, he almost cried.

Despite the verdict, the case exacted a heavy cost from Sung and his family.

“We lost a lot of business opportunities because of this investigation and trial,” Sung says, “and defending this case cost us about US$10 million.”

Some Americans tend to criticize other countries’ legal systems, “but look at the United States,” Sung says. “The DA system, for example, needs real changes. It didn’t have third-party supervision.”

After the release of the documentary, many Chinese-Americans who had been treated unfairly called up Sung to express their gratitude, he says.

The case is now included in America’s law school curriculums, too.

“I believe in the US system, but it needs true reform,” Sung says.


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