FDIC seeks $62 million from operators of failed Florida Community Bank

The defendants in the case are Stephen Price, the bank's former chairman, CEO and president, and its six other directors: Beauford Davidson, Patrick Langford, Jon Olliff, James O'Quinn, Bernard Rasmussen and Daniel Rosbough.

— The former directors of Florida Community Bank, including its CEO and longtime president, face a multimillion-dollar lawsuit brought by the Federal Deposit Insurance Corp., accusing them of being "grossly negligent" and "reckless" in operating the local bank.

The FDIC, which became the receiver for the Immokalee-based bank after it failed in January 2010, seeks damages of more than $62 million based primarily on losses from eight loans, which it says violated the bank's own lending rules.

One of those was a personal loan to Jerry Williams, the embattled ex-CEO of the failed Orion Bank in Naples, who has pleaded guilty to bank fraud and faces up to 15 years in prison. The loan was never repaid.

The other problem loans cited in the lawsuit were risky commercial real estate loans, mostly made to borrowers for the acquisition and development of property.

In its lawsuit, the FDIC alleges the bank's former directors "created an environment in which unsafe and unsound lending practices abounded."

"We don't comment on active litigation," FDIC spokesman David Barr said. "We let our complaint speak for itself."

The FDIC has filed similar lawsuits against other directors who oversaw failed banks. More than 400 banks have failed in the U.S. since 2008.

"So far we have brought 27 suits, but in total our board has authorized lawsuits for a total of 54," Barr said.

As part of its growth strategy, Florida Community Bank, historically an agriculturally focused bank, started making commercial real estate loans outside of its four-county market in 2003. By the end of 2006, it had an "extreme concentration" of acquisition and development loans that was "quadruple that of the average bank in its peer group," according to the lawsuit.

With commercial real estate loans, banks take a security interest in the property. The loans are risky because they're to developers, builders and speculators who often have several projects at once and whose incomes are tied to changing real estate values.

"Each of the defendants caused or permitted loans to be made to borrowers who were known to be or should have been known to be not creditworthy, or who had demonstrated a lack of ability to repay," the lawsuit states.

The defendants in the case are Stephen Price, the bank's former chairman, CEO and president, and its six other directors: Beauford Davidson, Patrick Langford, Jon Olliff, James O'Quinn, Bernard Rasmussen and Daniel Rosbough.

They are fighting the lawsuit, filed in U.S. District Court in Fort Myers.

"These gentlemen proudly served the community for over 30 years as directors of Florida Community Bank," said Mary C. Gill, one of their attorneys based in Atlanta, Ga., in an email. "They faithfully fulfilled their responsibilities and at all times acted in the best interest of the bank. The claims made by the FDIC are without merit and we look forward to defending their reputations and good names in this case."

"These gentlemen proudly served the community for over 30 years as directors of Florida Community Bank," said Mary C. Gill, one of their attorneys based in Atlanta, Ga., in an email. "They faithfully fulfilled their responsibilities and at all times acted in the best interest of the bank. The claims made by the FDIC are without merit and we look forward to defending their reputations and good names in this case."

A federal review of the bank after it failed blamed its collapse on its weak management and its risky commercial real estate loans. The review concluded that as the CEO and only inside director, Price operated the bank as a "classic one-man show."

"The noted loan underwriting deficiencies and problems are indeed serious, especially the personal loan to Williams based on what happened to him and Orion," said Ken Thomas, a Miami-based banking expert and economist.

In 2008, Williams got a loan for more than $5.9 million from Florida Community Bank, approved solely by Price when the bank was in a "critically dangerous condition" and at risk of failure, according to the lawsuit.

The personal loan was approved despite being over the bank's lending limit of $5 million for this type of loan. On his own, Price didn't have the authority to authorize a loan for more than $2.5 million and the loan violated the bank's lending rules because it was secured by Williams' shares in Orion, which weren't "readily marketable," the suit states.

Orion's privately held stock lost all of its value after Orion failed in November 2009.

Additionally, Price got a loan from Orion after he approved Williams' loan, "creating the appearance of impropriety and self-dealing," the FDIC contends.

The lawsuit outlines other questionable loans. Among them, according to the FDIC:

■ Two acquisition and development loans were made to Lake Eve Development LLC for more than $4.4 million in 2005, then increased by another $1.6 million in early 2006. Continued extensions and renewals of the interest-only loans violated the bank's policy.

■ A $17.6 million acquisition and development loan was made to Bermont Loop LLC between August 2005 and April 2006. It was authorized as an interest-only loan, though the borrower had no immediate plans to develop his property.

■ A $25.6 million acquisition and development loan was made to Arboretum Development LLC in February 2006, despite a failing real estate market. The loans exceeded the bank's lending limit on secured loans.

After Florida Community Bank failed, it cost the FDIC more than $350 million.

"Any loss to taxpayers is significant," banking analyst Thomas said. "The FDIC should have zero tolerance for losses that come out of our pockets."

The FDIC is blaming the bank's directors for less than 20 percent of the total losses, Thomas pointed out. "Who is responsible for the other 82 percent?"

He questions why state and federal regulators didn't step in sooner to stop the "grossly negligent loan underwriting and loan administration" at Florida Community Bank.

"Where were the regulatory cops when you needed them?" he asked. "Regulatory 'warnings' are not enough. Rather, they should have taken earlier enforcement and other actions to change unwanted behavior. If the cops keep pulling you over for speeding on I-75 and letting you off with warnings, is that going to change your behavior?"

The warnings by regulators date back to 2005. But it wasn't until Oct. 7, 2008, that they issued a cease-and-desist order against the bank, requiring tighter controls over its financial practices and an outside review of the bank's management.

The FDIC prefers to try to reach a settlement in cases, based on the cost of litigation. In many cases, a settlement won't come close to the damages sought by the FDIC.

"That is mainly because individuals don't have the resources and there isn't sufficient liability insurance that we can tap," Barr said. "It's really based on the ability of the defendants to pay."

© 2012 Naples Daily News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Comments » 19

mr_1_term_proposition writes:

Thanks obama.

Beachglow writes:

It's about time these people in banking and investing are held responsible for their bad deeds. They've allowed our country and people to go through hell for their greed.

They should have to pay back every dime.

rasputin writes:

I'm sure these are just 7 good ole republican job creators, and should be left alone so they can create jobs.

roadhouse writes:

in response to rasputin:

I'm sure these are just 7 good ole republican job creators, and should be left alone so they can create jobs.

No, Obama can't leave them alone because they are republicans. But Obama doesn't go after dems who engage in the same behavior, like Maxine and Sid Waters...

baldygrandpa writes:

in response to mr_1_term_proposition:

Thanks obama.

And whose watch was it on?

The warnings by regulators date back to 2005. But it wasn't until Oct. 7, 2008, that they issued a cease-and-desist order against the bank.

Idiot.

savethewhalz writes:

"The defendants in the case are Stephen Price, the bank's former chairman, CEO and president, and its six other directors: Beauford Davidson, Patrick Langford, Jon Olliff, James O'Quinn, Bernard Rasmussen and Daniel Rosbough." I have good news for these gentlemen. The Marianna Federal Correctional Facility boasts a no tolerance policy on inmate assaults involving sodomy and/or unlawful penetration.

staghorn writes:

and y'all is spoken here!

LANGFORD, PATRICK
LITHIA, FL 33547 STEPS AND RISERS OF FLORIDA/CEO/CFO $250 MCCAIN-PALIN VICTORY 2008 - REPUBLICAN

Price, Janet
IMMOKALEE, FL 34142 Florida Community Bank/Consultant $1,000 MARIO DIAZ-BALART FOR CONGRESS - REPUBLICAN P 12/01/2003

Price, Janet
IMMOKALEE, FL 34142 Florida Community Bank/Consultant $554 MARIO DIAZ-BALART FOR CONGRESS - REPUBLICAN P 12/01/2003

PRICE, STEPHEN
IMMOKALEE, FL 34142 FLORIDA COMMUNITY BANK $2,000 BILL MCCOLLUM FOR US SENATE - REPUBLICAN P 08/19/2004

PRICE, STEPHEN
IMMOKALEE, FL 34142 FLORIDA COMMUNITY BANK $500 BILL MCCOLLUM FOR US SENATE - REPUBLICAN

RASMUSSEN, BERNARD
LABELLE, FL 33975 CITRUS GROWER $200 BILL MCCOLLUM FOR US SENATE - REPUBLICAN G 09/21/2000

i reckon y'all just can't trust 'em.

manforpeace writes:

Laura you know most of those people those rotton loans were made to, exceeding limits, don't you?
You should do a where are they now...
If you did you would see they are all doing well, again. I wonder if they still laugh at the largest fine in collier history down on Bayshore.. Those folks had you guys at NDN all goofy. You guys should have been questioning them and their bank buddies, exceeding bank policies.. But no you guys were at all the meetings and writing glowing wishful wonderland stories. Now you get to air all the trash like you know nothing.
What happened to ethics? CRA used to put on some good meetings.. How much are they in dept? Millions and millions.
Same crap different five year plan...

brown writes:

Aspen, Colorado supports Obama so should Naples.

Sick writes:

Arboretum?

LOL

RainMan writes:

Hmmm... didn't the Democrats control both houses from 2006?

Hmmm... didn't the Democrats control all three branches of the American Government starting 2008?

Hmmm... when was it that Barney Frank and Chris Dodd said there is no problem with our financial loan system?

You can allways trust a PROGRESSIVE LIBERAL... http://email.glennbeck.com/gb40/c2.ph... , ... not :)

Banker26 writes:

Losers

Bramble writes:

Great news to see board of directors being held accountable. Too often, they are either in collusion with the CEO and then claim they were kept out of the loop. Worse, oftentimes, boards (even nonprofit boards) are composed of timid slackers who only sit silently nodding agreement in their big leather chairs like stuffed dolls. They ask no probing questions of CEO, do not bother to verify the answers CEO gives them. Lazy and uncurious, they are criminally negligent and have no business overseeing anything except their own breakfast.

TheyPavedParadise2 writes:

Just one of the things Immokalee will be known for.
Add to that one of the most expensive master plan processes for a small town in history.

Trexler writes:

all the crackers from east Collier & Hendry stole from the taxpayers, $400 mil...this and other banks, ..you take all valid paperwork to em and cant get a dime...its all the officers giving eachother bj's..and their buds that get to steal the money...no wonder we're all about broke...

TheyPavedParadise2 writes:

Does anyone know if Price donated to any local politicians? There are plenty of lists for federal candidates, but what about State reps and County Commissioners?

unfatcat writes:

One really has to laugh at these banking fiascos and govt. intervention anymore.

To the FDIC: the BIG FISH banks have taken over our shipwrecked economy, stolen the value of everything individuals own, and continue to show profit through the use of Bernanke's magic wand, while still holding the toxic property assets that Americans have already bailed them out for. It's time to raise a flag, give up, or something.

Sure, focus on the Naples Community Bank; so the five BIG, TOXIC banks can continue to grow in size and power. Thanks Obama. No, wait....that's wallstreet and big banking thanks you, the president who just hates those bad finance people who have never been more powerful in the world than today.

Patton writes:

The CEO and all of the board members are Tea Party members.

onlythetruth writes:

in response to mr_1_term_proposition:

Thanks obama.

Please note that everything that is alleged in the article took place during the Bush administration. Thanks W.

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