FDIC Sues Former Executives of Westsound Bank
By hdnelson
The redemption of past errors in the banking industry apparently will continue to play out over a period of years. This lawsuit concerns the responsibilities of corporate officers for the 2006 failure of Westsound Bank of Bremerton. Based on the allegations, it’s surprising that this does not appear to be a criminal lawsuit. From the Seattle Times:
In its lawsuit, filed Friday in federal court in Seattle, the FDIC estimates Westsound’s failure will cost the deposit insurance fund $106.4 million.
The lawsuit names Westsound’s former CEO, David K. Johnson; Brett Green, former executive vice president of sales and lending; and former board Chairman Louis Weir, as well as eight other former board members.
The FDIC suit says the defendants repeatedly ignored warnings from state and federal regulators about the bank’s lending practices and neglected to supervise a Federal Way loan officer who allegedly originated the 21 fraudulent loans.
Weir declined to comment, and Green and Johnson could not be reached for comment.
According to the regulators’ suit, loan officer Teresa Feller colluded from 2005 to 2007 with a homebuilder, borrowers and appraisers to gain approval of 142 fraudulent home-construction loans totaling $96 million. She earned more than $1 million in commissions from the bank.
The FDIC filed a separate claim in June against Feller, seeking to ban her from future involvement with any federally insured depository.
In that claim, the FDIC said the construction loans to “unqualified Russian immigrant borrowers” accounted for 83 percent of troubled loans found in an October 2007 examination of the bank by regulators.
More at http://seattletimes.nwsource.com/html/businesstechnology/2016821108_westsound22.html
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