Though the burden of proof is significantly lower in a civil case, in January when the FDIC sued to recover millions in the Integrity Bank failure, notably missing from the list of defendants is the central figure who still faces criminal charges in connection with the bank’s failure.
When federal prosecutors indicted two former Integrity Bank executives on charges of conspiracy, bribery, bank fraud and securities fraud because they tried to “rob the bank from the inside,” prosecutors highlighted Guy Mitchell’s alleged involvement as the bank’s supposed largest borrower and ‘central figure’ in the bank’s failure.
But months later, when the dust settled and the FDIC sued to recoup $70-million in losses, there is no mention of Mitchell in the lawsuit.
The FDIC pursues legal action against those allegedly involved in contributing to a bank failure. And any case involving directors and officers of banking are scrutinized by the FDIC.
The glaring and intentional omission of Mitchell in the lawsuit may suggest grave weaknesses in the federal criminal charges still pending against Mitchell, say legal experts, and at minimum reflects a contradiction in theories as to what really led to the bank’s demise.
“The losses alleged in the Complaint do not involve the borrower involved in the fraud losses,” writes Bard Brockman, Esq., a partner of the law firm Bryan Cave in Atlanta, on a company blog. “lt will be interesting to see if the other director defendants point to that alleged criminal conduct as the true proximate cause of the bank’s failure.”
Public statements by the bank acknowledge that Mitchell’s loans were not initiated by either of the two indicted bank executives.
Documents from August 2006 detail that a $20-million loan was approved by bank CEO Clint Day and bank president Steve Skow and not the two named indicted executives. The loans to Melborne, LLC. and Printers Row LLC lists Mitchell only as the guarantor, not the principal. Recorded documents confirm these two mortgages were satisfied.
The FDIC lawsuit paints a portrait of an exceptional liberal lending environment at Integrity Bank by several bank executives including Douglas G. Ballard, Integrity’s former Executive Vice President. That environment enabled—even encouraged—high risk, high reward real estate deals.
The FDIC suit does not allege that any bribes were used to encourage the bank to make loans to the 21 borrowers outlined in the FDIC lawsuit. The wrongdoing alleged involved undocumented, unexplainable and inappropriate disbursement of loan proceeds, inaccurate and inadequately supported loan presentations and violations of internal bank policies and Georgia Banking Regulations.
However the criminal indictment against Mitchell and banking offices tells a different story. It alleges that loans were “dispersed under false pretenses at the alleged approval and direction of Douglas Ballard.”
In a press release sent announcing the indictment, the government claims that Mitchell requested and Ballard helped disperse nearly $7-million out of a construction loan “relating specifically to supposed construction and renovation” at the ‘Casa Madrona,’ a luxury hotel owned by Michell in Sausalito, Calif. The indictment alleges that none of the money was used for construction, and in fact no renovations had occurred.
That loan was the largest involving Mitchell and the bank, and it was for $29.5-million. Published reports show that $12-million was earmarked to finance the purchase of the hotel; public statements by prosecutors allege the remainder was designated to finance construction and renovation of the property into a hotel-condo.
In a report from the FDIC on March 08, 2007, the bank had the hotel appraised “as is” for $32.8-million.
Records show that on or about June 2007—three months later—only $21-million had been shown booked on the loan by Integrity Bank. The rest of the money never left the bank. Banking experts say they will be interested to know: what the remaining $8.5-million was to be used for and the figures for the alleged renovation costs.
The bank’s own appraisal and records appear to contradict alleged “public statements made by prosecutors involving Mitchell.”
Records appear to show Troutman Sanders, LLP. represented Mitchell in all of his real estate transactions.
Link to the FDIC Lawsuit: http://www.docstoc.com/docs/document-preview.aspx?doc_id=81898733
Direct link: https://prnewschannel.com/2011/06/17/fdic-lawsuit-omits-name-of-alleged-%e2%80%98central%e2%80%99-figure-in-integrity-bank-failure/SOURCE: Americans for Truth in Banking
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