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FDIC Files Lawsuit Against Directors and Officers of Failed Integrity Bank

January 21, 2011

Authors

Bard Brockman

FDIC Files Lawsuit Against Directors and Officers of Failed Integrity Bank

January 21, 2011

by: Bard Brockman

The FDIC filed its third lawsuit against selected former directors and officers of a failed financial institution on January 14, 2010.  The defendants in the lawsuit are certain former directors and officers of Integrity Bank (Alpharetta, Ga.), which the FDIC placed into receivership on August 29, 2008.  The complaint, which was filed in the U.S. District Court for the Northern District of Georgia, asserts claims for negligence, gross negligence and breach of fiduciary duty.

The central theme of the complaint is that the defendants served on the bank’s Director Loan Committee, and in that capacity they pursued an “unsustainable growth strategy designed to exploit the then-expanding ‘bubble’ in the residential and commercial real estate market.”  Directors who did not serve on that committee were not sued. The FDIC alleged a variety of misdeeds by the defendants, including the following:

  • the adoption of a loan policy that set a
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Court Dismisses Failed Bank Investor Class Action; Signals Obstacles for Plaintiffs in Similar Cases

January 19, 2011

Authors

Jake Bielema

Court Dismisses Failed Bank Investor Class Action; Signals Obstacles for Plaintiffs in Similar Cases

January 19, 2011

by: Jake Bielema

In a decision which could have significance in other cases in which investors in failed banks seek to recover their losses, on January 14, 2011, the United States District Court for the Northern District of Georgia dismissed an investor class action against the directors of the holding company which owned Haven Trust Bank, a Duluth Georgia based bank which was closed by the Georgia Department of Banking on December 12, 2008. Patel v. Patel, et al., U.S.D.C., ND of Ga., Civil Action No. 1:09-cv-3684-CAP (Order, 1/14/11). In dismissing the case at the pleadings stage, the Court identified several difficult obstacles that plaintiffs in such cases will have to overcome in order to proceed with a claim, including the difficulty of establishing that their losses were caused by something other than the catastrophic turmoil felt by the banking industry as a whole, which has resulted in hundreds of

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FDIC Files Lawsuit Against Directors and Officers of Failed Illinois Bank

November 3, 2010

Authors

Bard Brockman

FDIC Files Lawsuit Against Directors and Officers of Failed Illinois Bank

November 3, 2010

by: Bard Brockman

The FDIC filed a lawsuit against directors and officers of Heritage Community Bank (Glenwood, Ill.), which was taken into FDIC receivership in early February 2009.  The FDIC lawsuit was filed in federal court in Chicago on November 1, 2010, and it is the FDIC’s second suit against directors or officers of failed institutions since the advent of the current real estate recession. For a copy of the complaint, click here.

The FDIC’s case theory revolves around the bank’s commercial real estate (“CRE”) lending program.  The lawsuit alleges that the directors and officers failed to protect the bank from the “substantial inherent risks of large-scale CRE lending,” by:

  • routinely financing CRE projects without any meaningful analysis or adequate appraisals;
  • repeatedly making loans with excessive loan-to-value ratios; and
  • failing to properly evaluate the creditworthiness of CRE borrowers and guarantors.

One unique factual allegation in the lawsuit is that the

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