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07/19/09
FDIC will start suing bank executives, local experts say
Filed under: General, Business
Posted by: Lillian Wong @ 8:49 pm

The Federal Deposit Insurance Corp. is expected to start taking civil and criminal legal actions against bank directors and other business executives involved in the real estate meltdown and soured deals that have dragged down the financial sector.

Legal and financial experts expect the FDIC to initiate civil lawsuits seeking financial damages from bank directors and other individuals deemed responsible for bank failures. The suits would seek civil damages for lost funds, but also could evolve into criminal prosecutions. Those actions would mirror lawsuits filed by the FDIC and other federal entities in the late 1980s and early 1990s against savings and loan executives Charles Keating and Neil Bush.

Michael Manning, managing partner of the Phoenix law office of Stinson Morrison Hecker LLP, prosecuted Lincoln Savings & Loan cases involving Keating. He expects the FDIC to file civil suits against bank directors, developers, commercial brokers and attorneys in the wake of more foreclosures and failures in the commercial real estate market.

“That will start the more serious inquiries by the FDIC,” he said.

Manning said the FDIC will have more ammunition to sue bank directors and others involved in commercial deals, because those deals are larger than residential mortgages, and any negligence or fraud will be magnified. While bank executives are the most likely targets, Manning said prosecutors could go after real estate developers, brokers, appraisers and accountants, as well as their corporate attorneys, if they intentionally misled or misrepresented projects to lenders.

“Typically, the insider can’t do this alone,” Manning said.

Seventy-nine banks have failed since the beginning of 2008, including First National Bank of Arizona, Washington Mutual and Silver State Bank, all which operated in Valley.

Jack Hebert, a < ?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Phoenix attorney with Polsinelli Shughart PC, represented Keating in American Continental Corp.’s Chapter 11 bankruptcy case in 1989. He said the federal government could use some of the legal powers gained in the S&L aftermath to go after banks now.

“All of their superpowers are still in existence,” he said.

Hebert said the FDIC could sue bank directors for significant damages for negligence and defaulting on their fiduciary duties. He said more extreme cases could prompt civil and criminal fraud charges. He predicts most of the civil cases will be settled out of court.

FDIC spokesman David Barr said the federal banking regulatory agency has not filed any director suits and does not comment on future actions.

Suits likely will be filed, said Dale Walters, CEO of Keats Connelly & Associates LLC, a Phoenix-based investment firm.

“I expect (the FDIC) to make a statement,” he said. “The government wants to show the public they mean business, and that what they are doing to fix the banks is working.”

The faltering commercial real estate market is prompting foreclosures as well as scuttled commercial and mixed-use projects. A tanked real estate market in Phoenix and other large U.S. cities could exact a higher toll on the banks that financed those projects, prompting more failures and lawsuits.

“The FDIC generally engages in a broad-based investigation any time there is a failure of a financial institution,” said Allen Kimbrough, executive director of the Maricopa County Bar Association. “Of particular interest or concern to the FDIC are issues such as self-dealing or breaches of fiduciary duty by directors or management, or even attorneys, which may result in civil litigation. On occasion, the matters are so egregious that criminal prosecution is warranted and pursued.”

Kimbrough did legal work for the FDIC and for some defendants in Texas during the S&L crisis in the late 1980s.

Several banking officials in the Phoenix market contacted for this story did not respond to requests for comment.

It is likely the FDIC and other prosecutors will go after failed banks, in part because regulators can access all of a bank’s records after it falls into receivership. But legal experts said there also could be civil or criminal actions against executives, directors and other deal makers at banks that are still operating if they made deals negligently or fraudulently.

Milton Schroeder, a law professor and banking law expert at Arizona State University, said the FDIC has a broad range of regulatory and legal powers at its disposal, and it could look at possible misuse of funds, reckless negligence, fraudulent appraisals and financial mis­management.

Get Connected

Stinson Morrison Hecker LLP: www.stinson.com

Keats Connelly & Associates LLC: www.keatsconnelly.com

Polsinelli Shughart PC: www.polsinelli.com

Maricopa County Bar Association: www.maricopabar.org

Fast Facts

Notable U.S. bank failures since January 2008:

First National Bank of Arizona
Washington Mutual
Silver State Bank
First Bank of Beverly Hills
IndyMac Bank
Bank of Wyoming
Colorado National Bank

Source: Federal Deposit Insurance Corp.

Phoenix Business Journal - by Mike Sunnucks Friday, July 17, 2009



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Commercial real-estate vacancies top 20%
Filed under: General, Real Estate
Posted by: Lillian Wong @ 8:32 pm

Phoenix-area businesses vacated a net 1 million square feet of commercial real estate in the second quarter - enough to cover more than 17 football fields, including the end zones.  more…



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Act protects renters amid foreclosures
Filed under: General, Real Estate
Posted by: Lillian Wong @ 8:21 pm

Renters living in foreclosed homes have been thrown a lifeline.

In the past, a few days after a foreclosed home was sold in a trustee sale, renters heard a knock on the door. They had to go. Never mind the fact that they still had plenty of time left on their lease. That contract was wiped out by the foreclosure. The bank which likely took over the home wasn’t interested in being a landlord.   more…



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Fulton Homes sees burst of sales in recession
Filed under: General, Real Estate
Posted by: Lillian Wong @ 8:07 pm

Fulton Homes is fending off a two-pronged attack in both bankruptcy and state courts from lead creditor Bank of America, which gained ground recently when a judge ruled it could go after Fulton’s sales and home-warranty companies in its push for remittance.

But the Tempe-based builder has unleashed a secret weapon that could fend off any immediate threat of liquidation:  more…



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CityScape names new restaurants, shops
Filed under: General, Real Estate
Posted by: Lillian Wong @ 7:55 pm

Six restaurants, two boutiques and a law firm will join a $900 million project under construction in downtown Phoenix.

CityScape is a cluster of businesses that will include an office tower, shops, eateries, a hotel and 165 condos. The first parts of the project are expected to open in spring 2010.   more…



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Deals abound for bargain-hungry apartment renters
Filed under: General, Real Estate
Posted by: Lillian Wong @ 7:14 pm

Job losses and an explosion of foreclosure homes on the rental market have caused serious losses for Phoenix-area apartment communities, according to a new study.

Apartment complexes suffered severe declines in both occupancy rates and lease rates during the past year, with the average rent for all types of apartment and townhouse units declining by nearly 6 percent in 2008.  more…



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Real-estate agents use Twitter, blogs to boost clients
Filed under: General, Real Estate
Posted by: Lillian Wong @ 7:01 pm

Dru Bloomfield has worked in Valley real estate for five years and contributed to the real-estate blogs click2az.com and athomeinscottsdale.com for nearly half of that time.

And for the past year and a half, she, like many Valley real-estate agents, have added Twitter and Flickr to her arsenal.  more…




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Ariz. one of top states for mortgage fraud
Filed under: General, Mortgages
Posted by: Lillian Wong @ 6:42 pm

Despite the real estate market’s meltdown last year, Arizona still made the Federal Bureau of Investigation’s list of top states for mortgage fraud.

 

Data from the law enforcement and the mortgage industry put Arizona in the top 20 states for lending fraud, according to the FBI’s new report. Several sources were used to compile the fraud report.  more…



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Phoenix buys 29 acres to add to mountain preserve
Filed under: General, Real Estate
Posted by: Lillian Wong @ 6:38 pm

A Phoenix businessman who recently purchased 39 acres along 19th Avenue beside Shaw Butte has sold most of the land to Phoenix to add to its mountain preserve.   more…



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Downtown high-rise’s woes may hurt other area condos
Filed under: General, Real Estate
Posted by: Lillian Wong @ 5:57 pm

Financial woes at a luxury downtown high-rise could hurt property values at similar central and downtown Phoenix condominium complexes.

Last week, the lender for the Summit at Copper Square took the first step toward foreclosing on 74 unsold units in the multicolored tower near Chase Field.   more…



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Home-appraisal rules stir ire
Filed under: General, Real Estate
Posted by: Lillian Wong @ 4:35 pm

Less than three months after new rules for home appraisers kicked in, the real-estate industry is in uproar.

Realtors, home builders, mortgage brokers and the appraisal industry itself all agree the rules are causing problems. Some are backing a bill in Congress to kill them.  more…



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Loan modifiers in Ariz. must be licensed in 2010
Filed under: General, Mortgages
Posted by: Lillian Wong @ 12:02 am

People handling loan modifications in Arizona will have to be licensed by next summer.

 

Legislation to regulate this growing segment of the home-mortgage industry was signed into law late Tuesday by Gov. Jan Brewer.  more…



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