CEO of failed First NBC facing criminal probe, judge says

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The founding CEO of the failed First NBC Bank and another former executive are the subjects of a criminal probe, according to a federal judge.

U.S. District Judge Wendy Vitter recently granted a motion to stay a civil lawsuit brought by unsecured creditors against former executives and auditors of the bank. She cited criminal investigations involving former CEO Ashton Ryan, who founded First NBC in 2006, and William Burnell, who was the bank's chief credit officer from 2007 until shortly before its failure in April 2017.

"The court believes that several of the defendants in this matter have real and appreciable risk of self-incrimination by proceeding with discovery," she said in her Aug. 16 decision on the motion.

Vitter's decision did not give the exact nature of the possible charges, nor name the prosecutor, but mentioned the investigations were related to one involving Gregory St. Angelo, First NBC’s former general counsel.

St. Angelo pled guilty to bank fraud in July. The charges in that case were brought by Peter Strasser, the U.S. attorney for the Eastern District of Louisiana.

Shane Jones, a spokesman for Strasser's office, said Justice Department rules preclude confirming or denying the existence of an investigation. Efforts to reach Ryan were unsuccessful, and no contact information for Burnell was readily available.

Separately, a former First NBC lender is dealing with a different set of problems.

Robert Calloway, who was one of the New Orleans bank’s senior commercial lenders, is contesting efforts by the Federal Deposit Insurance Corp. to bar him from banking and levy a $125,000 civil money penalty, Michael Magner, a lawyer with Jones Walker in New Orleans, wrote in an email to American Banker.

“As reflected in the FDIC’s own petition, each and every loan involved in the matter exceeded Mr. Calloway’s loan authority, and was expressly negotiated and approved by the bank’s president and CEO, whom the FDIC’s Inspector General described as a 'dominant officer' who controlled the lending relationship in question as well as many others," added Magner, who is representing Calloway.

In an order made public on Aug. 29, the FDIC claimed that Calloway “recklessly participated or engaged in unsafe or unsound banking practices and breaches of his fiduciary duty,” particularly in regard to tens of millions in loans to an unnamed developer. The agency maintains that Calloway signed off on the loans despite the borrower's lack of sufficient collateral.

The FDIC described the pledged collateral as “overvalued, speculative, and/or nonexistent, resulting in a collateral shortfall and unsecured debt,” adding that Calloway “knew or should have known” about the deficiencies.

Magner said his client denies these allegations, adding that only the bank’s president and CEO, and in some instances the board, had the authority to make the loans.

The FDIC alleges that Calloway managed the relationship with the developer, whose borrowings rose to $123 million from $59 million between September 2014 and August 2016. The borrower ultimately failed to repay the debt in full, resulting in “millions of dollars of financial loss,” the agency said.

Calloway worked at First NBC from June 2006 until it failed. He was on its senior loan committee throughout that time, the FDIC said.

Founded by Ryan in 2006, the $4.7 billion-asset First NBC was known for a strategy of investing in low-income and historic properties to reap tax credits.

The bank’s collapse, which cost the Deposit Insurance Fund about $997 million, is the biggest failure of the last four years. Hancock Holding in New Orleans assumed the bank's deposits and bought about $1 billion of its loans.

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