Federal Reserve issued an enforcement measure against Lynnwood, Wash.-based UniBank this week amid allegations that the bank was embroiled in a Ponzi scheme.

UniBank and its parent, U&I Financial Corp., reached an agreement with the central bank and the Washington state Department of Financial Institutions to make changes to strengthen its management and operations of the bank because of what the Fed called deficiencies in consumer compliance risk management.

The state banking regulator, along with the Federal Reserve Bank of San Francisco, conducted two bank investigations and reported on February 12 and July 18 that they identified unspecified deficiencies at the bank. A Fed review, reported June 4, found deficiencies in the bank’s consumer compliance risk management program.

The reviews follow Ponzi allegations against UniBank. A changed one lawsuit filed in Snohomish County Superior Court added more than 100 plaintiffs, alleging that UniBank and First Fed Bank were involved in facilitating more than 90 loans to invest in WaterStation Technology.

The lawsuit alleged that WST’s founder, Ryan Wear, took advantage of the small business loan system and sold investments in water bottling station machines that WST said would be installed and maintained in stores and other outlets for a share of the profits once an investment is made. made. Investors claim they were told they would get a share of the profits. The lawsuit claimed it was a Ponzi scheme because new investor money was allegedly used to pay returns to previous investors.

In June last year, victims of a alleged Ponzi scheme sued UniBank in federal court for losses incurred through loans the bank offered to finance its investments in an oil and gas technology company, Clean Energy Technology Association, Inc.

CETA claimed to have invented and owned a patent for a technology that would build carbon capture and utilization units that could be installed on oil and natural gas wells and pipelines to pull carbon dioxide from the gas. The CCUs did not perform or return the expected profits, and the company used the money to pay back previous investors.

However, the judge said the plaintiffs had not convincingly shown how UniBank would have benefited from its employees’ alleged Violations of the Racketeer Influenced and Corrupt Organizations Act. UniBank’s participation in any fraudulent scheme with CETA would expose the bank to significant financial risk, the judge found.

“Plaintiffs fail to plausibly allege a benefit. Accordingly, UniBank and U&I cannot be held vicariously liable for the conduct of their employees, and Plaintiffs fail to state a RICO claim,” the judge said.

Leadership changes began at UniBank in February when Stephanie Yoon, then vice president and chief risk officer, stepped in as acting CEO. In July, the bank’s The board confirmed Yoon as permanent CEO. The bank made three key appointments alongside Yoon: Ken Johnson and Scott Strand joined as new board members and promoted existing director Ellis Chang to chairman.

In September, UniBank made two further appointments to its management team, with Robert Disotell as executive vice president and chief credit officer and JJ Kim as executive vice president and chief banking officer.

Following the Fed’s regulatory action, UniBank agreed to take steps to fully utilize U&I’s financial and administrative resources and submit a written plan to regulators, outlining plans to strengthen board oversight of the bank’s management and operations, including lending administration, credit risk management , capital, earnings, credit rating and consumer compliance review and risk management.

UniBank must submit a written program on its grading of the loan portfolio detailing the standards and criteria for assessing the credit quality of loans, including specifying the factors used to assign appropriate risk classes to loans and procedures for re-rating the grading of loans if any material changes in the performance of the borrower or the value of the collateral.