A Florida thrift is seeking to protect its collateral from being used by the New York State banking department to pay off the debt of a failed check processing company.
Fort Pierce, Fla.-based Harbor Financial is accusing Superintendent of Banks Neil Levin of planning to sell $40 million in loans made by Nationar, while keep half of the cash collateral backing those instruments. The loans were made by Nationar in 1993 and 1994 to at least 15 employee stock ownership plans across the country.
The $700 million-asset thrift claims that Mr. Levin plans to use the remaining money to pay off some of Nationar's debt, estimated at about $29 million as of the Feb. 6 seizure of the company by the state.
Banking department officials declined to comment.
Harbor is asking the state supreme court in New York to issue a restraining order and preliminary injunction to block any transaction. The thrift wants the court to bar any transfer of loans unless the full collateral is included or the excess cash returned.
Harbor's ESOP has a $1.5 million loan from Nationar, backed by Harbor stock and $1 million in cash.
"We'd be happy if all of the collateral transferred to a buyer of a loan, but it is our understanding that there are or may be plans not to do so," said Harbor attorney Ray Gustini of Peabody & Brown in Washington.
In court documents filed last Friday, the thrift accuses Mr. Levin and Nationar of breach of contract, breach of Nationar's duty of reasonable care, and unjust enrichment.
The thrift claims in the court papers that neither Nationar nor the superintendent "have any right to apply the cash collateral toward their own accounts" since the thrift never defaulted.
Harbor also alleges that Nationar defrauded the ESOPs by delaying loan approval until it was too late for borrowers to seek other financing and then demanding more cash collateral that it needed to fund its failing businesses.
Nationar, which was founded in 1933 as a liquidity source for the state's thrifts, was seized by the state banking department after a loss of customer confidence and a run on its funds precipitated a liquidity crisis. The state is still trying to sell off the company's remaining assets.
Loans were also made to ESOPs at Carver Federal Savings Bank in New York, Community Savings in North Palm Beach, and St. Paul Bancorp in Chicago, Mr. Gustini said.
