The legal spat between the government and a failed Colorado bank just took a nasty turn.
The Federal Deposit Insurance Corp. filed a lawsuit Friday in U.S. District Court in Colorado against nine former executives and directors at United Western Bank, which failed in 2011. The lawsuit, which seeks more than $35 million in damages, claims that the former officials wrongfully approved at least 17 business loans from November 2006 to August 2009. The loans, worth about $76 million, later defaulted, according to the FDIC's complaint.
The FDIC has also charged the officials with negligence, gross negligence and breach of fiduciary duty for increasing United Western's concentrations in commercial real estate and acquisition, development and construction loans despite knowledge of the risks involved. The complaint alleges that the defendants discussed the bank's precarious position in a weakening real estate market in emails and board meetings.
"The defendants knew that the bank was highly exposed in the area of CRE and ADC loans that would be negatively affected by a decline in the real estate market, and, therefore, the defendants needed to exercise a heightened degree of care when approving such loans," the complaint claims. "Instead of exercising heightened care, however, the defendants did the opposite."
Former executives named in the lawsuit include Scot Wetzel, chief executive; Gary Petak, chief credit officer; William Snider, chief financial officer; Cindy Sterett, senior vice president of credit administration; and two vice presidents, Anthony Codori and John Umbaugh. It also names former directors James Bullock, Charles Berling and Bernard Darre.
The Office of Thrift Supervision closed Union Western in January 2011. Bank executives petitioned to reverse the decision, arguing that regulators acted prematurely in closing the bank. The U.S. District Court for the District of Columbia found in favor of regulators in March 2013.
14-Day Free Trial
Corrected January 22, 2014 at 4:00PM: An earlier version of this article misstated the amount in damages the FDIC is seeking from former executives and directors of United Western Bank. It is $35 million.