Feds sue Integrity Bank officials, including state senator

Federal banking regulators Tuesday announced a lawsuit against eight former insiders of a failed Alpharetta bank – one of them a state senator who was just named chairman of the Senate Banking Committee.

State Sen. Jack S. Murphy, R-Cumming, is among the former Integrity Bank executives or directors accused by FDICl regulators of gross negligence and various breaches of fiduciary duty related to a series of loans made from 2005 to 2007. The FDIC seeks damages of “over $70 million.”

The civil suit is just the third filed nationally, and the first in Georgia, by the FDIC against the officers and directors of a failed institution since the banking crisis started.

The 56-page lawsuit, filed in federal court in Atlanta, paints Integrity as an uninhibited lending warehouse with slipshod controls and a loan committee of directors and management that badly failed in its duties.

Georgia leads the nation in bank failures since mid-2008. Integrity was the first of 52 banks to fail during that time. Since its collapse, two former bank officers have pleaded guilty to federal criminal charges.

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The suit is the first of an expected wave of litigation and civil penalties by the FDIC against insiders of failed Georgia banks, as the agency tries to recoup losses to its insurance fund.

Regulators filed suit in 24 percent of bank failure cases during the Savings & Loan crisis of the late 1980s and early 1990s.

Along with Murphy, who was on the Integrity board of directors, other defendants named in the suit are: Steven Skow, former Integrity CEO; Clinton M. Day, a former bank chairman; former senior lender Douglas G. Ballard; and former directors Alan K. Arnold, Joseph J. Ernest, Donald C. Hartsfield and Gerald O. Reynolds.

Day, a real estate developer, former state senator and one-time Republican candidate for lieutenant governor, once served on the Senate banking committee.

Stay with ajc.com for more on this developing story.

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