Florida bankers and the FDIC probe

Posted on Monday, November 22, 2010

As The Wall Street Journal breaks the news that the Federal Deposit Insurance Corp. is conducting 50 criminal investigations into former executives at failed banks, it’s only natural to wonder whether former banking executives in Florida will wind up in handcuffs.
Florida suffered 41 bank failures since the start of 2009, including that of Coral Gables-based BankUnited FSB, which was the most costly. It’s safe to say, there is no shortage of people to investigate, but running a bank into the ground doesn’t mean they violated the law.
There’s nothing criminal about making risky loans or investing in securities that plummeted in value. In the case of most bank failures, they were caused by faulty decision-making by executives, regulators failing to tell the bank to limit risks fast enough and the general economic downturn. However, criminal activity has played a role in some past local bank failures.
In 2006, Hamilton Bank Chairman and CEO Eduardo Masferrer was found guilty of defrauding investors and regulators. He inflated the earnings and financial condition of the Miami-based bank, which failed in 2002.
In June, Lee Bentley Farkas, former chairman of Ocala-based mortgage lender Taylor, Bean & Whitaker, was arrested and charged with fraud in connection with the failure of Alabama-based Colonial Bank. He was accused of misappropriating funds to cover losses and lying to federal officials when the bank asked for Troubled Asset Relief Program funds.
The former executives of Colonial Bank have not been charged in that case.
Coral Gables developer Guy Mitchell was indicted in May, along with several executives of the failed Atlanta-area-based Integrity Bank, for using loan proceeds from the bank for fraudulent purposes.
In Naples, there are media reports that the FBI is investigating the failure of Orion Bank. Former Chairman and CEO Jerry Williams was cited in the Federal Reserve System’s Office of Inspector General report on the bank’s failure for making false statements to regulators. That included misleading regulators about the source of a capital injection and purchase of distressed assets from the bank. The money came from a loan the bank gave to investors.
So far, no charges have been filed against Williams.South Florida Business Journal - by Brian Bandell

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