SEC Launches Probe Into SunTrust Accounting Deficiencies

SunTrust Banks disclosed Wednesday that the Securities and Exchange Commission has launched a formal probe into the bank's restatement of earnings for the first and second quarters of 2004, and has issued subpoenas seeking documents related to SunTrust's accounting procedures.

Three SunTrust employees were fired last year in connection with accounting irregularities--deficiencies in the bank's method of determining loan-loss reserves--uncovered by an internal investigation. The investigation revealed inadequate control procedures, insufficient documentation, and a failure to detect errors in loan-loss calculations.

The bank restated earnings upward for the first half of the year because of the discovered irregularities.

Under the Sarbanes-Oxley Act's section 404, companies must include within their annual reports a statement from management attesting to the effectiveness of internal controls over financial reporting. SunTrust has said it probably will be unable to make such a statement in its 2004 annual report.