A civil lawsuit has been filed by federal regulators who claim that six insiders of one Georgia bank were negligent in their duties. According to reports, the bank officials approved some, or all, of nine loans that allegedly violated their own bank policies, prudent standards or bank regulations. The lawsuit was filed on Friday, July 13, in a U.S. District Court in Gainesville. Other business litigation action involving Georgia banks may be yet to come.
This lawsuit is said to be the eighth that the FDIC has filed in Georgia against bank officials. Georgia has the highest reported rate of bank failures in the nation, with 80 since 2008. The former CEO and directors of this failed Winder bank were named as defendants. It claims that defendants did not prevent policy violations, did not adequately inform themselves of the risks relating to the loans in question, and did not adequately consider loans which they should have known would cause losses.
Once the loans went bad, the bank is said to have lost more than $8 million. The lawsuit is asking for compensation in the form of damages. Overall, officials say this bank is believed to have cost the FDIC nearly $42 million out of its insurance protection fund. The FDIC is seeking compensation from either bank leaders or the closed firm’s liability insurance to cover its payouts.
The former CEO of the First Piedmont bank is among those named in the suit. When asked by the media about the action, he said he had only recently been notified about the case and that he would have no comment. There has been no comment from any of the others named in the suit, either.
How this case will ultimately fare is unclear. The defendants likely face challenges that will require assembling a solid support system to help protect their rights. No doubt Georgia bank officials will also be monitoring the status of this business litigation case.
Source: ajc.com, “FDIC sues insiders at failed bank,” J. Scott Trubey, July 18, 2012