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​FDIC Sues Former D&Os of First Bank of Beverly Hills

June 25, 2012

Authors

Bard Brockman

​FDIC Sues Former D&Os of First Bank of Beverly Hills

June 25, 2012

by: Bard Brockman

The latest drama from Beverly Hills is not a revival of Beverly Hills 90210 or a sequel to Beverly Hills Cop, but rather a 42-page complaint filed against the former directors and officers of First Bank of Beverly Hills (“FBBH” or the “Bank”).  FBBH was closed and put into receivership on April 24, 2009.  The FDIC’s lawsuit was filed on April 20, 2012, just days before the expiration of the three-year limitations period.  For a copy of the FDIC’s complaint, click here.

According to the complaint, the director and officer defendants pursued an “unsustainable business model” focused on rapid asset growth through the extension of high-risk CRE and ADC loans.  At the same time, the FDIC alleges, the defendants were weakening the Bank’s capital position by approving large quarterly dividend payments (based on “false profits” from problematic loans) to the Bank’s parent corporation, in which many of the

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D&O Carrier Seeks Denial of Coverage Against Former Directors of Failed Bank

May 1, 2012

Authors

Jake Bielema

D&O Carrier Seeks Denial of Coverage Against Former Directors of Failed Bank

May 1, 2012

by: Jake Bielema

On March 30, 2012, Progressive Casualty Insurance Company filed an action naming as defendants the FDIC as Receiver of Omni National Bank, as well as the former officers and directors of Omni whom the FDIC had previously sued.  The Complaint asserts a claim for declaratory judgment that Progressive is not obligated to cover any of the claims asserted by the FDIC against the former directors and officers in the Omni litigation.  This action is significant in that it raises a number of coverage issues which former directors and officers of failed banks may see raised by their own D&O insurance carriers, and the presence or absence of D&O coverage is a critical factor considered by the FDIC in determining whether to bring an action seeking any kind of recovery.

Progressive had underwritten a director and officer liability policy for the directors and officers of Omni with a total

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FDIC Sues Former D&Os of Cape Fear Bank

April 30, 2012

Authors

Bard Brockman

FDIC Sues Former D&Os of Cape Fear Bank

April 30, 2012

by: Bard Brockman

On April 4, 2012, the FDIC filed an action against the former directors and officers of Cape Fear Bank, Wilmington, NC (“Cape Fear” or the “Bank”).  The lawsuit was filed shortly before the expiration of the 3-year statute of limitations which commenced when the Bank was closed and placed into FDIC receivership on April 10, 2009.  For a copy of the FDIC’s complaint, click here.

The FDIC’s complaint identifies two central causes of Cape Fear’s failure.  First, the FDIC alleges that the D&O defendants pursued a flawed strategy of opening branch operations without consideration for the cost of new branch operations and without any plan to monitor those operations.  Second, the FDIC alleges that the defendants were enticed by the real estate “bubble,” and that they aggressively pursued rapid growth through high-risk and speculative real estate lending.  The defendants approved loans even where the Bank lacked sufficient capital,

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FDIC Sues Former Directors of Florida Community Bank (Immokalee, FL)

April 5, 2012

Authors

Bard Brockman

FDIC Sues Former Directors of Florida Community Bank (Immokalee, FL)

April 5, 2012

by: Bard Brockman

Sixty-three banks have failed in Florida from April 2008 through March 2012.  But until recently, the FDIC had not filed any lawsuits against former D&Os of those failed Florida banks.  That all changed on March 13, 2012, when the FDIC filed a complaint against the former directors of Florida Community Bank (“FCB”) of Immokalee, Florida.  For a copy of the FDIC’s complaint, click here.

FCB was placed into FDIC receivership on January 29, 2010.  The losses to the Federal Deposit Insurance Fund arising from FCB’s failure are estimated to be $349.1 million.

According to the FDIC’s complaint, FCB strayed from its long-time agriculture-based strategy, and it embarked on a risky growth strategy by focusing on CRE and ADC loans outside of its local market.  FCB took on “extreme” concentrations in CRE and ADC loans that were several times the concentrations of the average bank in its peer group. 

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FDIC Sues Former Directors and Officers of Omni National Bank

April 3, 2012

Authors

Jake Bielema

FDIC Sues Former Directors and Officers of Omni National Bank

April 3, 2012

by: Jake Bielema

On March 16, 2012, the FDIC, in its capacity as Receiver for the failed Omni National Bank, brought a lawsuit in the Northern District of Georgia against several former officers, some of whom had also served as directors, of the Bank seeking to recover over $24.5 million in losses the bank suffered on over 200 Community Development Lending Division (“CDLD”) loans on low income residential properties.  The Complaint also seeks to recover an additional $12.6 million in what it contends were wasteful expenditures on low income Other Real Estate Owned (“OREO”) properties. A copy of the FDIC’s complaint is available here.

Omni National Bank of Atlanta, Georgia was closed by the regulators on March 27, 2009.  This lawsuit was brought almost exactly three years later, which is the operative statute of limitations.

Most of the defendants named in the Complaint were former CDLD officers, who are alleged to

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FDIC Sues Former Directors and Officers of Broadway Bank (Chicago, IL)

March 23, 2012

Authors

Bard Brockman

FDIC Sues Former Directors and Officers of Broadway Bank (Chicago, IL)

March 23, 2012

by: Bard Brockman

On March 7, 2012, the FDIC filed an action against the former directors and two former officers of Broadway Bank (“Broadway”) of Chicago, Illinois.  For a copy of the FDIC’s complaint, click here.  Broadway was placed into receivership on April 23, 2010.  The FDIC estimates that the losses to the Federal Deposit Insurance Fund due to Broadway’s failure will approach $400 million.

The lawsuit alleges that the D&O defendants embarked on “reckless” strategy of rapidly growing the bank’s assets by approving high-risk ADC and CRE loans without regard for appropriate underwriting and credit administration practices, the bank’s own loan policies, and federal lending regulations.  The risks to the bank was exacerbated, the FDIC alleges, because many of the loans were for projects located outside of Illinois, and Broadway did not have sufficient staff to monitor those projects.

The FDIC is particularly galled by the D&O defendants’ approval of

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FDIC Brings Suit Against Former Directors and Officers of Freedom Bank of Georgia

March 22, 2012

Authors

Jake Bielema

FDIC Brings Suit Against Former Directors and Officers of Freedom Bank of Georgia

March 22, 2012

by: Jake Bielema

On March 2, 2012, the FDIC, in its capacity as receiver for Freedom Bank of Georgia, brought suit against twelve (12) former directors and officers of the Bank, many of whom served on the bank’s Loan Committee.  The complaint alleges that, because of the defendants’ misconduct, the FDIC, as receiver, is entitled to recover at least $11,050,623.  Interestingly, Freedom was closed by the Georgia Department of Banking & Finance on March 6, 2009, thus the FDIC’s lawsuit was filed almost exactly three (3) years from the date that the bank went into receivership, which is the applicable statute of limitations. A copy of the FDIC’s complaint is available here.

The FDIC’s damage claim is based on losses from twenty-one (21) commercial real estate and acquisition development and construction loans which were approved by the bank from May 16, 2005 through June 20, 2007.  The complaint alleges an undifferentiated

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FDIC Brings Suit Against Former Officers of Community Bank & Trust of Cornelia

March 12, 2012

Authors

Jake Bielema

FDIC Brings Suit Against Former Officers of Community Bank & Trust of Cornelia

March 12, 2012

by: Jake Bielema

On February 24, 2012 the FDIC, in its capacity as receiver, filed suit against the former President & CEO as well as the former Sr. Vice President of the Retail Banking Group for Community Bank & Trust of Cornelia, Georgia.  In the complaint, the FDIC seeks to recover losses in excess of $11 million that the FDIC alleges the bank suffered as a result of the defendants’ breaches of fiduciary duties, negligence, and gross negligence.  For a copy of the FDIC’s complaint, click here.

Community Bank & Trust of Cornelia, Georgia failed on January 29, 2010.  The Bank had been in existence since 1900, and had 36 branches across northeast Georgia at the time of its closing.  Defendant Charles Miller became the CEO of the Bank in 2006, and during the time that he served as CEO, co-defendant Trent Fricks served as Sr. Vice President of a retail

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Court Confirms “Gross Negligence” Standard for Bank Director Liabilty in Georgia

February 29, 2012

Authors

Jake Bielema

Court Confirms “Gross Negligence” Standard for Bank Director Liabilty in Georgia

February 29, 2012

by: Jake Bielema

As many readers are aware, Georgia has led the nation in the number of failed financial institutions in the recent financial crisis.   Integrity Bank, of Alpharetta, was one of the first of those banks to fail in Georgia, on August 28, 2008, and drew the first lawsuit filed by the FDIC as receiver against former directors and officers in Georgia.  The lawsuit was filed against former members of the Director Loan Committee of the Bank, and asserted claims against the Defendants based on their alleged pursuit  of an unsustainable rapid growth strategy, involving high risk lending concentrated in speculative real estate and acquisition, construction and development loans.   The suit alleged over $70 million in losses from 21 such loans, between February 4, 2005 and May 2, 2007.

On February 27, 2012, in response to motions to dismiss filed by the defendants, and motions to strike certain affirmative defenses

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FDIC Sues Former Officers of Silver State Bank

February 17, 2012

Authors

Jake Bielema and Bard Brockman

FDIC Sues Former Officers of Silver State Bank

February 17, 2012

by: Jake Bielema and Bard Brockman

On February 9, 2012, the FDIC sued four former officers of Silver State Bank (Henderson, NV). Silver State operated 12 branch offices in and around Las Vegas and 4 branch offices in metro Phoenix. In addition, it had 12 loan production offices in several western states and in Florida. Silver State was closed and placed into FDIC receivership in September 2008. For a copy of the FDIC’s complaint, click here.

The defendants in this action are Silver State’s former CEO, the former EVP of Real Estate Lending and two former loan officers. According to the FDIC’s complaint, in early 2006, the CEO steered the bank on an aggressive growth strategy focused on high risk Acquisition, Development and Construction (”ADC”) loans. The CEO and the EVP of Real Estate Lending aggressively pursued lending opportunities in the Bank’s two principal markets – Las Vegas and Phoenix – despite numerous indications

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