Saying that executives and directors of the failed Crescent Bank & Trust Co. exposed it to “excessive and imprudent risks,” the Federal Deposit Insurance Corp. filed suit against five of the bank’s former leaders last month.
The Jasper bank’s July 2010 failure cost the FDIC $297.5 million. The FDIC is suing to recover more than $11 million the bank lost on four commercial real estate loans and two lines of credit.
While they were responsible for ensuring the creditworthiness of borrowers, the bank’s directors and officers failed to oversee lending and approved millions of dollars worth of risky and poorly written loans, the FDIC said in a suit filed July 19 in the U.S. District Court in Atlanta.
The loans included $14 million for one borrower to buy 63.6 acres for a 220-townhome project, nearly three times the loan amount allowed by the bank’s policies. The borrower showed “little net worth,” the FDIC said the bank’s credit memorandum said.
A $1.5 million line of credit to a nearby bank, New Horizons Bancshares, was also problematic, the FDIC said. Crescent’s parent company was in the process of renewing its own line of credit with New Horizons, and that bank was in serious financial trouble. It eventually failed, leading to a loss for Crescent.
The suit was filed against J. Donald Boggus Jr., the president and CEO; Charles R. Fendley, senior vice president of mortgage origination; and bank directors John S. Dean Sr.; Ryker J. Lowe; and Richard M. Zorn.
Boggus and Fendley filed for bankruptcy before the suit was brought, and their debts were discharged. They were included in the case so the FDIC could access their insurance policies, the suit said.
Attorneys for the men said they could not comment on the case.
The suit is the 17th FDIC liability lawsuit against leaders of a failed Georgia bank. The state leads the nation in the number of bank failures since mid-2008.
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