Recent court rulings will make it more difficult for federal regulators to collect losses from former directors or officers of failed banks - including one case involving a state senator who heads the banking committee.
State Sen. Jack Murphy and other directors and executives of Integrity Bank of Alpharetta cannot be held responsible for all of its losses because the Federal Deposit Insurance Corp took over the bank’s loans and sold them, U.S. Judge Steve C. Jones ruled. The insiders can still be held responsible for some of the losses, which could be determined in by trial or mediation.
Integrity failed in August 2008. The FDIC sued the bank’s insiders in 2011, including Murphy, in a bid to recoup losses from deposit insurance. It was the first such filed in Georgia by the FDIC, which has since filed seven others.
In a second Georgia case, Jones affirmed an earlier decision Aug. 14 to dismiss some of the FDIC’s claims against insiders at Haven Trust Bank, of Duluth. Georgia business law affords protections from claims of negligence against bank officers and directors, Jones ruled, and to win its case the FDIC will have to prove gross negligence, which is a higher standard.
The FDIC is appealing that decision to the 11th Circuit Court of Appeals.
The case against Haven Trust’s officers must go to mediation later this month, and if not resolved the FDIC can refile claims of gross negligence, Jones ruled.
Defendents’ attorneys were pleased.
“We have not won the case, but we are on the way,” said Tod Sawicki, an Alston & Byrd attorney defending insiders from Haven Trust Bank, which failed in December 2008.
The FDIC does not comment on specific cases, but spokesman David Barr said they file such suits to try and recoup money when the FDIC believes the claims have merit.
Georgia leads the nation with 83 bank failures since mid-2008. Eight of the 32 suits against directors and officers filed by the FDIC during the banking crisis involve Georgia institutions.