Wednesday, February 15, 2012

FDIC Sues Failed Bank Execs for $86M

LAS VEGAS (CN) - Federal regulators hit four officers of the failed Silver State Bank with an $86 million lawsuit, claiming they negligently approved wobbly real estate loans that led to the bank's 2008 collapse.
The Federal Deposit Insurance Corp. sued Corey Johnson, the bank's CEO and co-founder, and vice presidents Douglas French, Gary Gardner and Timothy Kirby, in Federal Court.
Johnson "abandoned the bank's prior conservative lending strategy in favor of a high-risk ADC [acquisition, development and construction] lending strategy funded by brokered deposit," the FDIC says in its 76-page complaint.
The high-risk ADC loans were made between January 2006 and February 2008, the FDIC says.
"All of the defendants were grossly negligent and breached their fiduciary duties in originating, recommending, approving and/or administering the loss loans in violation of Silver State's loan policies," the complaint states. "Ultimately, as one witness testified in a sworn statement, the bank's failure was caused by land loans of this nature."
The FDIC claims that under co-founder Tod Little's guidance, the bank's "growth was steady and controlled, with conservative lending focused on small business administration loans to qualified borrowers."

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