N.D. Bank Writes Off $1M, Sues Former Loan Officer

quarter to cover allegedly fraudulent loans to a now bankrupt company. Now Bnccorp, Bismarck, a $323 million-asset banking company, is suing the former executive it says extended $1.5 million of loans to the company, which defaulted on the credits. In a complaint filed in Bismarck's Burleigh County Court, Bnccorp's BNC National Bank is seeking $1.9 million in damages from Debra J. Gronlie, a senior vice president who was dismissed in April, and her husband, Paul Andahl. In 1995 and 1996, Ms. Gronlie allegedly approved loans for Top Dog Productions of Park Rapids Inc., a Minnesota maker of motion simulator devices, which are used in virtual reality arcade games. The bank alleged that in return for the loans Tog Dog extended "favorable terms" to the couple for the purchase of motion simulators. According to the complaint, Mr. Andahl has interests in companies that operate motion simulators. However, Ms. Gronlie's attorney, Maurice McCormick, Fargo, N.D., said this week that Bnccorp's allegations against his client are "absolutely false." Mr. McCormick said Ms. Gronlie believed all the information she got from Top Dog regarding its equipment was truthful. She and her husband did not benefit financially from BNC National's relationship with Top Dog, the lawyer said. Mr. McCormick also said BNC National's account with Top Dog was appropriately reviewed by the bank's loan committee. "She is not only a victim of Top Dog, but she is a victim of the bank," Mr. McCormick said. In its complaint, the bank accused Ms. Gronlie of representing to BNC that a $750,000 line of credit to Top Dog was "adequately secured by motion simulators owned by Top Dog," though she allegedly "knew that the line of credit was not adequately secured." And the suit also alleged that Ms. Gronlie circumvented BNC National's internal loan approval procedures in connection with the Top Dog line of credit. Gregory K. Cleveland, Bnccorp's president and chief financial officer, said the bank began investigating Ms. Gronlie's loans after an internal audit uncovered some irregularities. The $1.9 million that the bank seeks in damages equals the amount the holding company put in loan-loss reserves during the second quarter, increasing its reserves to $2.1 million. The chargeoff and increase in reserves hurt the holding company's second-quarter earnings. Bnccorp reported a net loss of $568,000, or 24 cents per share, compared to net income of $439,000, or 19 cents per share, for the second quarter of 1996. Mr. Cleveland said he expects to recover most of the reserved $1.9 million from the bank's insurance. He said he met with the insurer Wednesday to discuss the case. He said Ms. Gronlie had been a BNC National employee for six and a half years before her dismissal. Previously she had worked at First Bank System Inc.'s Fargo bank.