The
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
“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
Jack Hebert, a < ?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />
“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
“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
“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
Kimbrough did legal work for the FDIC and for some defendants in
Several banking officials in the
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
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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.
