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SEC upgrades SunTrust inquiry, subpoenas papers

SunTrust Banks Inc. said Wednesday that the Securities and Exchange Commission has issued subpoenas for documents as part of a formal investigation of its financial statements.

The investigation involves errors in data used to calculate the amount in a loss reserve concerning SunTrust loans for people who buy cars through auto dealers.

In October, the company said it would restate earnings higher for the first and second quarters of 2004 by about $31-million due to the errors. The following month, it fired its chief credit officer and two others in its credit division. The company's comptroller also was reassigned to a nonaccounting job.

The error was discovered during final preparation of third-quarter 2004 financial results. The company's internal inquiry also found some finance executives acted improperly in their interaction with the bank's auditor, PricewaterhouseCoopers, and the bank said it determined some minutes of meetings of the bank's loan loss committee had been falsified.

The company previously announced that it received notice that the SEC was conducting an informal inquiry.

The inquiry has been upgraded now to a formal investigation, SunTrust said Wednesday, adding that the bank is continuing to cooperate.

SunTrust ranks as the third-largest bank in Florida with more than $30-billion in deposits, or roughly 10 percent of the market.

For years, the Atlanta bank has relied on Florida as a chief profit center.

This month, longtime SunTrust executive Tom Kuntz took over as president of the Florida unit upon the retirement of George Koehn.

He inherits a tough situation here, with the bank battling familiar foes Bank of America and Wachovia as well as well-capitalized market newcomers such as Fifth Third Bancorp and BB&T.

SunTrust is expected to report fourth-quarter earnings Jan. 20. The company is expected to earn $417.6-million, or $1.27 a share, according to the average estimate of 24 analysts polled by Thomson Financial.

SunTrust is one of the nation's largest commercial banking organizations. It also has operations in Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia and the District of Columbia.

SunTrust shares fell 45 cents to $70.37 Wednesday on the New York Stock Exchange. The stock rose 3.3 percent last year, lagging a 6.8 percent gain in the benchmark Philadelphia KBW Bank Index.

Times staff writer Jeff Harrington contributed to this report, which used information from the Associated Press and Bloomberg News.