FDIC Sues Ex-Silverton Directors, Officers for $71 Million
August 22, 2011, 8:19 PM EDTBy David Beasley
(Adds background on collapse from sixth paragraph.)
Aug. 22 (Bloomberg) -- The Federal Deposit Insurance Corp. sued former directors and officers of Atlanta-based Silverton Bank NA, seeking $71 million to help recoup costs caused by the biggest bank collapse in Georgia history.
Silverton consistently disregarded its own policies when making loans, according to the suit filed today in federal court in Atlanta. At the same time, it built a “large and lavish” office building and spent millions of dollars on new corporate aircraft, the FDIC said.
“Silverton’s aggressive expansion plan was accompanied by significant weaknesses in loan underwriting, credit administration and a complete disregard of a declining economy,” the agency said in the complaint. The officers and directors were accused of “robotically voting for approval of transactions without exercising any business judgment.”
The damages sought represent less than a fifth of the $386 million the FDIC spent on Silverton, the lawsuit alleges. The bank was declared insolvent in May 2009.
Begun in 1986 to serve small community banks, Silverton gained a national charter and expanded into real estate development and acquisition loans, according to the suit. Its assets grew to $3 billion in 2008 from $1.7 billion in 2005, the FDIC said.
Wholesale Bank
Silverton, a wholesale bank with no consumer operations, was owned and overseen by more than 400 community lenders in the region. It provided banking services, including wire-transfer systems, bond trading and credit-card operations, to about 1,400 institutions in 44 states.
The bank’s troubles began in early 2007, when it changed from a state to a national charter so it could accelerate its growth, according to a report by the Treasury Department’s Office of Inspector General, which reviews failures of banks regulated by the Office of the Comptroller of the Currency.
Silverton’s commercial real estate lending rose to $1.2 billion at the end of 2008 from $681 million at the end of 2006, the report said. The bank had $4.1 billion in assets when it failed. At the time, the FDIC estimated the closing would cost the insurance fund $1.3 billion.
The suit names former chief executive officer and board member Tom A. Bryan, former Chief Lending Officer Brian D. Bueche, and former Chief Credit Officer and Senior Vice President Brock Fredette. Bryan, the lead defendant, and Fredette didn’t respond to messages left on their home telephones seeking comment on the suit. Efforts to locate Bueche were unsuccessful.
The agency sued 14 other former directors as well.
The case is Federal Deposit Insurance Corporation v. Bryan, 1:11-CV-2790, Northern District of Georgia (Atlanta).
--Editors: Fred Strasser, Peter Blumberg
To contact the reporters on this story: David Beasley at dbeasley3@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
