Federal regulators have sued nine former insiders of the failed Buckhead Community Bank, including its founder, rent-to-own retail pioneer Charlie Loudermilk, claiming gross negligence in its operation.
The Federal Deposit Insurance Corp. said in a complaint filed last week in U.S. District Court in Atlanta the former officers and directors of Buckhead Community allowed excessive concentrations in real estate development loans and among other things, the purchase of pieces of bigger loans from other institutions without properly vetting them.
Regulators singled out 13 loans that resulted in $21.8 million in damage to the bank.
The FDIC has now sued insiders at 11 failed Georgia banks, more than in any other state. Georgia leads the nation in bank failures since mid-2008.
Loudermilk, founder of rent-to-own giant Aaron’s Inc., famously founded Buckhead Community in 1998 after receiving poor customer service at another bank. A message left for his assistant after hours Monday was not immediately returned. Loudermilk retired as chairman of Aaron’s earlier this year.
Also sued were former bank CEO Martin Cosgray; former bank officers Louis J. Douglass III, Gregory W. Holden and Darryl Overall; and directors Hugh Aldredge, David Allman, John Margeson and Larry Martindale.
“The complaint and the allegations do not have merit and we will demonstrate that in court,” Robert Long, an attorney for the defendants with Alston & Bird, told The Atlanta Journal-Constitution on Monday.
Buckhead Community also had branches under the names including Cobb Community Bank, Sandy Springs Community Bank and Alpharetta Community Bank.
Regulators contend the bank “recklessly” pursued a growth strategy through aggressive commercial real estate lending and the purchase of loan participations, or pieces of bigger loans from other banks. Both can be volatile types of loans.
Buckhead Community failed in December 2009, resulting in an estimated loss at the time of $241.4 million to the insurance fund that protects depositors.
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