A pair of Oregon banks are facing charges in a civil lawsuit brought by victims of an alleged Ponzi scheme.
Banks that belong to Umpqua Holdings (UMPQ) and Pacific Continental (PCBK) were named as defendants in a class-action lawsuit filed in the Multnomah County circuit court on Friday, according to court files. Eleven investors in Berjac of Oregon and Berjac of Portland, divisions of an insurance-premium finance company now in Chapter 11 bankruptcy, claim that the banks helped perpetuate the firm's Ponzi scheme. The complaint claims that the banks made loans to Berjac and other involved parties despite knowledge that the company was involved in speculative real estate investments and using new investors' money to pay back banks and other investors.
"Little, if any, of investor funds were actually used in the insurance premium financing business, which was declining throughout the period and never very profitable," the lawsuit claims.
Fred "Jack" Holcomb, Berjac's 93-year-old founder and a member of the Oregon Bankers Hall of Fame, is also charged in the lawsuit, along with the Holcomb Family LP, Holcomb Family Trust, and accounting firm Jones & Roth.
The defendants are seeking more than $10 million in damages.
In my view, its another class-action shakedown, Steven Philpott, Umpquas general counsel, said in an interview. Our banking relationship with Berjac ended more than four years ago. We provided them with a checking account and a secure line of credit. The plaintiffs made unsecured loans to Berjac, and they claim they were getting paid 5% to 7% interest compounded quarterly. Our loans were repaid, theirs werent, and now theyre looking for someone to cover their losses.
"Although we can't discuss this matter in detail due to its legal nature, be assured we take this matter very seriously," Pacific Continental Chief Executive Hal Brown said in a press release. "While we intend to vigorously defend against this lawsuit, we remain unwavering in our 40-year plus commitment to our clients, employees, shareholders and community partners."
Pacific Continental is a $1.4 billion-asset company based in Eugene, Ore. Umpqua has $11.5 billion in assets and is based in Portland, Ore.