Federal regulators filed a civil lawsuit against 10 former insiders of a failed Atlanta bank on Friday that has been at the center of several criminal cases for borrower and banker misconduct.
Downtrodden neighborhoods near downtown were a gold mine for Omni National Bank, a former high-flying Georgia bank with its own corporate jet. Omni failed in March 2009.
It is the seventh Federal Deposit Insurance Corp. civil suit against failed bank insiders in Georgia, which leads the nation with 77 bank failures since mid-2008.
The suit said Omni’s collapse resulted in more than $300 million in losses to the Federal Deposit Insurance Corp.’s fund, which protects depositors.
The FDIC is suing over faulty handling of more than 200 loans and foreclosed property, resulting in $37.1 million in damages to the bank.
Among the names listed in the suit are: Stephen Klein, the bank’s former CEO; Irwin Berman, Omni’s president; and Jeffrey Levine, a former executive vice president.
Omni’s Community Development Lending Division, at the center of the suit, made short-term, high-interest loans to builders and speculators in lower income neighborhoods. These clients would fix up and often flip or rent the properties.
Six former officials in that division, including Levine, allegedly made scores of loans that later soured “despite numerous, repeated and obvious violations” of bank policy, bank regulations and safe and sound banking practices, the suit said.
Multiple Omni officials and borrowers have faced charges in the wake of the bank’s failure, including Levine.
The Atlanta Journal-Constitution reported in January 2010 that Omni’s collapse left hundreds of vacant homes in its wake, and the bank was a magnet for flippers and, sometimes, straw buyers who bought homes with fraudulent loans.
Levine pleaded guilty in 2010 to federal charges he doctored the bank’s books to obscure losses on bad loans. Prosecutors credited him for assisting authorities in multiple criminal cases. He was sentenced last year to 5 years in federal prison and ordered to pay $6.8 million in restitution.
Klein and Berman failed to properly supervise Levine and the CDL division and disregarded many “red flags” in the unit, the suit said. The CDL group ultimately became the second-largest producer of loans in the company.
The suit also accuses Klein and Berman of following an aggressive lending strategy that put profit ahead of bank policy and regulations.
The CDL division made more than 200 loans that violated bank policy, regulations or prudent and sound lending practices from 2005 to 2007, according to the suit. The loans resulted in $24.5 million in losses, the suit said.
The suit also faulted certain top officers for wasteful spending on foreclosed properties held on the bank’s books.
A spokesman for the FDIC declined to comment, citing agency policy about open litigation.
Alston & Bird attorney Theodore Sawicki, who represents Klein and former bank chief credit officer Eugene “Terry” Lawson, said he had not seen the suit and couldn’t comment on the allegations.
“We will demonstrate that each of them fulfilled their responsibility to the bank and they are not liable for any losses arising from the bank’s failure,” Sawicki said.
Jeff Horst, attorney for defendant Jules Greenblatt, a former officer in the CDL divison, also had not seen the case, but said he and his client would defend the case vigorously.
The claims against Berman are “completely unfounded,” said Berman’s attorney, David Balser with King & Spalding. Balser said his client has an “impeccable reputation as a banker” and vowed to vigorously defend the case.
Attorneys for the other defendants could not be found.
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