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A decision by a Georgia judge this week raised new obstacles in the Federal Deposit Insurance Corp.'s claims against former managers of the failed Integrity Bank.
March 1 -
The FDIC has filed a lawsuit against former directors and executives at the failed Mutual Bank, claiming, among other things, that $250,000 was spent on a lavish wedding that management detailed as a bank function.
October 31 -
As the FDIC files more lawsuits against former directors of failed banks, a common theme has emerged from the defendants’ legal arguments: the FDIC is to blame for the failures. Industry observers are divided as to whether the defense will hold water in court.
September 19
The Federal Deposit Insurance Corp. has filed a lawsuit against former officers and directors of Broadway Bank in connection with the bank's collapse two years ago.
The agency is seeking damages of $104 million, or roughly the amount the bank lost on 17 loans the FDIC said were particularly ill-advised, according to a complaint filed Wednesday in U.S. District Court in Chicago. News of the lawsuit was first reported Wednesday by Crain's Chicago Business.
Broadway was a family-owned bank run by the brothers of former Illinois State Treasurer Alexi Giannoulias. The bank lost more than $75 million in 2009, its last full year of operation, and when it failed in April 2010, nearly 20% of its loans were at least 90 days past due, according to Federal Deposit Insurance Corp. data. Its assets and deposits were taken over by MB Financial Bank in Chicago.
Defendants include Demetris Giannoulias, who was Broadway's president and chief executive at the time the bank failed, and George Giannoulias, who was its chairman. Alexi Giannoulias was an officer at the bank before he became Illinois' Treasurer in 2006, but he is not named in the suit.
Several board members were also named as defendants.
The FDIC said in the complaint that the bank's torrid growth between 2000 and 2009 — when its assets roughly quintupled — was fueled by an "unsustainable expansion" of loans to real estate developers throughout the country. At the time the bank failed, more than half of its loans were for properties outside of Illinois.
"These types of loans, which are highly sensitive to market fluctuations, require close monitoring, lending expertise and respect for lending risk. None of these were present at Broadway Bank," the FDIC said.
It said that two loans in particular, both on properties in California, were approved on the same day in mid-2008 that regulators met with bank officials about tightening Broadway's lending practices.
"Defendants ignored the regulators," the complaint said. "Indeed, immediately following the June 24, 2008, meeting, the Board of Directors approved two grossly imprudent loans which resulted in losses to the bank of approximately $12 million."
The suit is one of about two dozen the FDIC has filed against officers and directors of failed banks stemming from the 2008 financial crisis.
In a statement to Crain's, Demetris Giannoulias, disputed the FDIC's allegations.
"The FDIC now blames Broadway's former officers and directors for not anticipating the same unprecedented market forces that also surprised central bankers, national banks, economists, major Wall Street firms, and the regulators themselves," Giannoulias said. "Every officer and director of Broadway Bank did their best for the institution and they will vigorously fight these unsubstantiated claims."
