The amended complaint adds details about a loan Peoples First Community Bank issued to a borrower referred to in court documents as “PQH.” PQH received $12.2 million in late 2005, and then defaulted without paying a balance of nearly $4.5 million in principal and interest.
After the collateral and other recovery avenues had been exploited, the losses to the FDIC were estimated at $3.9 million. According to court records, the loan was to finance a development of 239 single-family homes in
The PQH loan is the only one detailed in the court records, and the FDIC uses it to illustrate the problems with each of the 11 loans it claims were not vetted properly by the eight defendants in the lawsuit:
Powell approved nine of the 11 transactions totaling $63.9 million. When the borrowers defaulted, a total of $33.18 million went unpaid, and the FDIC had to take the hit.
After documented attempts to restore Peoples First to fiscal health, regulators took over the bank in December 2009 and seized the bank’s records. The government’s case relies now on thousands of pages of those records, filings
The FDIC says it’s ready to begin sharing its evidence against the defendants with them, but the defendants are demanding confidential information that will require the FDIC to review hundreds of thousands of pages of documents on a line-by-line basis.
The most relevant records relate to the underwriting, credit and collateral documentation of the borrowers in the 11 transactions — which the FDIC argues it has a duty to protect from public disclosure — and there are 18,000 pages of those documents. The defendants have demanded more documents dating back to, in some cases, the opening of the bank in 1983.
“Such a process is inefficient and will
Charles Wachter, an attorney representing the defendants, fired back that the FDIC seeks “to hide its documents under a blanket of secrecy,” according to court filings.
“The FDIC is hampering the defendants’ ability to defend themselves from the overreaching and abusive allegations in this case,” Wachter wrote.
A hearing will be conducted over the phone next week to iron out the issue.