Bank regulators probe Unity CEO's expenses

The Star-Ledger, November 21st, 2003

The Star-Ledger Archive COPYRIGHT © The Star-Ledger 2003

Date: 2003/11/21 Friday Page: 053 Section: BUSINESS Edition: FINAL Size: 699 words

Bank regulators probe Unity CEO's expenses

Anthony Feraro calls inquiry a 'misunderstanding'

By SAM ALI STAR-LEDGER STAFF

The state Department of Banking and Insurance is investigating questionable expense vouchers submitted by the chief executive of Unity Bancorp after the Clinton-based bank contacted regulators. Anthony Feraro, hired three years ago to clean up Unity's finances after the $400 million-asset bank landed in hot water with regulators, is now at the center of a probe by the bank and the Banking and Insurance Department.

"We got word of this late (Wednesday)," said Bill Heine, a department spokesman. "The bank notified us, and we're beginning to take a look at it."

In a prepared statement, Unity, which operates 12 branches in central New Jersey, said Feraro, 56, had taken a voluntary leave of absence pending completion of an inquiry "concerning certain expense reimbursement requests."

David Dallas, 47, the bank's chairman, has been named interim chief executive.

Contacted at his home in Readington yesterday, Feraro said he believes he will be "fully exonerated."

"I can't say too much, but I believe it's a miscommunication and a misunderstanding," he said. "As far as I'm concerned, it is a very minimal issue."

Feraro said he left the bank voluntarily and expected to return to his post in "one week."

The bank would not comment on the nature of the expense vouchers Feraro submitted. Feraro acknowledged he faces mounting personal expenses, but denied any financial wrongdoing.

Feraro and his wife, Kathy, who live in a palatial home on the grounds of the Stanton Ridge Country Club, had recently renovated their home to make room for their newly adopted daughter, Sophia Marie.

The couple adopted her from the Dominican Republic last year but have been unable to bring her home due to bureaucratic red tape. As a result, the baby lives in a private residence in the Dominican Republic with a full-time nurse at a cost of $4,000 to $5,000 a month.

Feraro, who in 2002 earned $292,760 in salary and $85,000 in bonus, admitted the adoption has been expensive, but insisted he didn't charge the bank for any personal expenses.

"It was funded all by me," he said.

It is unclear how long the probe by the bank and state regulators will take. According to an SEC filing, the matter has delayed the bank's ability to file its third-quarter financial results because its independent auditors have been unable to review the final numbers.

James Hughes, Unity's chief financial officer, said the bank will amend its filing when the inquiry is complete and was "confident" Unity's financial results would not be impacted.

Feraro, who previously worked at Zion's First National Bank in St. Louis as an executive vice president, was brought in by Unity to clean up the bank's finances. Until this week, it appeared he had done just that. The bank was officially given a clean bill of health by state and federal regulators in 2002.

Unity got into financial trouble in 1998, following its rapid expansion into Middlesex and Union counties, which more than doubled its branch network from seven to 17 and wore a gaping hole in the bank's wallet.

Generally, a bank's capital level - its own money, as opposed to depositors' money - is one of the primary indicators of its financial health. In Unity's case, the capital cushion to cover unexpected losses had fallen so low that federal and state regulators in September 2000 ordered the bank to raise more money.

Feraro, a native of Bound Brook, joined Unity two months later.

Under his tenure, the bank aggressively cut costs, sold several branches and closed a mortgage subsidiary.

Last month, Unity reported third-quarter net income of $1.3 million, or 23 cents a diluted share, a 35.3 percent increase compared to the year-ago quarter. It was the bank's 15th consecutive quarter of improved operating results.

"We've done a hell of a job," Feraro said yesterday. "We've gotten this bank turned around and we met our internal budgets every year, and this year will be no different. It's clean and in good shape and ready to move on to the next step of expansion."

PHOTO CAPTION: 1. Unity Bancorp CEO Anthony Feraro is being investigated by the bank and the state Department of Banking and Insurance for allegedly submitting questionable expense vouchers. He has taken a leave of absence. CREDIT: 1. 2000 STAR-LEDGER FILE PHOTO

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