Predatory Lending

Developer Sergio Pino's suit claims BankUnited broke promise on loan

Posted on Wednesday, January 12, 2011

Developer Sergio Pino, accusing BankUnited of being a "predatory financial institution," has sued the lender claiming it cost him more than $200 million in lost profits.
Pino's Miami-Dade Circuit Court suit centers on the Grand Bay at Doral mixed-use project that was to be built on 350 acres in western Miami-Dade. The complex was to cost $392 million and include 2,481 condos and single-family homes, retail buildings, a school and a church.
Plans for Grand Bay collapsed amid the recession and real estate meltdown.
Pino, president and chief executive of Century Homebuilders in Miami, sued BankUnited on Dec. 30, more than a year after the lender sued Pino and his wife, Tatiana. BankUnited said the couple owed more than $34 million over a 2006 land acquisition loan its predecessor institution, BankUnited FSB, had granted to Century and that they had guaranteed.
The 2009 lawsuit is pending.
Pino's lawsuit says BankUnited FSB executives "induced" him to pay down a $76.6 million loan to $35.5 million and promised they would provide a construction loan at a time when the they knew the lender's health was deteriorating.
In May 2009, five months after Pino paid down the loan and before he got a construction loan, the Federal Deposit Insurance Corp. took over the bank. A private equity group headed by veteran banker John Kanas immediately acquired and rechartered the bank from FDIC receivership.
In October 2009, BankUnited declared the loan it had inherited to be in default, claiming that Pino had failed to pay property taxes on the Doral site.
Rather than foreclose on the vacant land, BankUnited went after Pino's personal assets. Now Pino wants Miami-Dade Circuit Judge Barbara Areces to declare that the loan, with a current principal of about $34 million, is not in default.
Pino is also seeking more than $200 million in damages because BankUnited failed to provide a construction loan for Century Grand. The $200 million represents the profits Pino and his partners expected from the project, according to his lawyer, Miami attorney Victor Diaz.
A BankUnited spokeswoman said the bank does not comment on pending litigation.
To help finance Century Grand, Pino's company created the Grand Bay at Doral Community Development District, which issued nearly $93 million in bonds in 2007. The bonds, which would be paid off through a special tax to be imposed on future homeowners, was to fund some of the project's infrastructure.
Pino claims BankUnited convinced him to use a large part of the bond proceeds to reduce the principal on its loan to $35.5 million during a loan modification negotiation. At the time, Pino was seeking to have the loan extended.
In return, the lender said it would not take action against Century Grand and would grant Pino the construction loan to develop the project, according to the suit.
"Sergio did everything that they asked him to do, without having any obligation to do so," said Diaz, a longtime partner at Podhurst Orseck who recently left to start his own firm.
Diaz said the acquisition loan documents didn't call for Pino to reduce the principal.
Pino claimed BankUnited FSB should have disclosed its shaky financial condition.
"At the time the principal reduction representation was made, BankUnited was suffering a deteriorating financial condition and was under intense regulatory scrutiny," according to the suit. "BankUnited fraudulently induced Century Grand to use significant portions of the 2007 bond proceeds to make the principal reduction payments in order to help relieve regulatory scrutiny of BankUnited."
On May 21, 2009, BankUnited FSB was seized by the FDIC and sold to the Kanas group. Three weeks later, BankUnited began asking Pino for proof he had paid the property taxes on the land backing the $34 million loan, according to the suit.
Pino claims that BankUnited FSB executives had agreed during the talks to allow him to pay down the principal and convinced him to delay paying the taxes and instead use the money to develop the site, according to the suit.
The new bank disagreed and sued Pino and his wife.
Roger Slade, a Miami partner with Pathman Lewis, who represents BankUnited, declined comment.
"The sale converted a well-respected community bank into a predatory financial institution uninterested in working with its local clients base and motivated to artificially provoke defaults of performing loans in order to collect a FDIC-guaranteed pay-out of taxpayer dollars on foreclosed obligations," according to the Pino suit.
Diaz said BankUnited is not motivated to settle with Pino because the bank's losses are in large part absorbed by the FDIC and the taxpayers.
Abbey Kaplan, a Miami attorney with Kluger Kaplan Silverman Katzen & Levine, represents another developer who is suing BankUnited because its predecessor company did not fund a construction loan "due to constraints set forth by regulators." Kaplan, who wouldn't name his client or the project, said the developer had an "excellent relationship" with the old BankUnited until six months before it was seized.
Since the recession stalled numerous projects, developers have increasingly sued banks for failing to fund promised loans, he added.
"It is becoming more and more the go-to tactic," Kaplan said.
Wachovia Suit
The BankUnited loan is backed by 107 acres of the 350-acre site. The remaining portion secures a $65.6 million Wachovia loan that is now in foreclosure. Wachovia filed the foreclosure lawsuit against Pino's Atlas Property I in November 2009.
In a move that mirrors the recent litigation, Pino countersued, seeking more than $200 million in damages. He said Wachovia failed to fund a $392 million loan he planned to use to pay off the BankUnited loan, Wachovia's $65.6 million loan and to pay for construction.
As in the BankUnited suit, Pino claims Century Grand would have generated a $200 million profit.
The Wachovia case is pending as Pino and the lender "pursue settlement discussions," Diaz said.
Pino says the lender's actions cost him more than $200 million in lost profits.

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BankUnited is terrible. They had me tied up in a option arm that only benefitted them. When I tried repeatedly to get out of this loan they ignored my calls and correspondence. This bank is the worst of the worst.

linda 12/25/2012
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