Federal bank regulators are suing 11 insiders at a failed Alpharetta bank, accusing them of gross negligence as the government widens its efforts to recoup losses related to failed lenders.
The Federal Deposit Insurance Corp. accuses the executives and directors of of Alpha Bank & Trust of sloppy lending practices and strategy focused on “growth above all else, including safety and soundness,” according to a lawsuit filed Friday in U.S. District Court in Atlanta.
The lawsuit seeks $23.9 million in damages.
Alpha Bank failed in October 2008, only about 30 months after it opened, and was one of the early casualties of the economic collapse.
Georgia leads the nation with 70 failures since mid-2008. This is the fourth liability lawsuit filed by regulators seeking damages from bank insiders.
More are expected as the FDIC tries to recoup losses to its Deposit Insurance Fund, which protects depositors in failed banks. The FDIC estimated in the suit that Alpha Bank’s collapse cost $214.5 million.
Among the defendants are: David Michael Sleeth, a former chief financial officer; Robert Skeen, a former chief lending officer; and Joseph Briner, the bank’s founding president and CEO.
The Atlanta Journal-Constitution obtained the suit late Friday, and efforts to reach defendants for comment were not immediately successful.
The defendants were responsible for the safe operations of the institution, the suit claims.
The suit singles out 13 specific loans, totaling $44.5 million, which regulators claim showed severe flaws.
Among the faults were violations of statutory lending limits, loans lacking adequate financial documentation and inadequate appraisals or analysis of collateral.
All 13 loans were approved, the suit contends, “despite plainly inadequate, incomplete, or outdated financials of the borrowers and/or the guarantors” in the loans, resulting in loans to borrowers “with no apparently ability to repay or otherwise service the loans.”
The FDIC alleges that each loan “suffered from key deficiencies that should have been readily apparent to even a careless reviewer.”
The defendants allowed the bank to grow substantially faster than their regulator-approved business plan, the suit alleges, “at the expense” of sound underwriting.
Regulators also criticized the bank for compensating loan officers based on making loans and not for quality.
The insiders allowed lenders to fill the bank’s portfolio with risky real estate loans, many of which went into default in the bank’s first two years and depleted its capital reserves, causing it to fail, the suit says.
About the Author
