The executives of United Western Bank are painting the final months of their thrift's life as a fight against a regulator that had already begun digging a grave.

The executives, acting on behalf of the failed Denver thrift, filed a motion on Friday for summary judgment in the U.S. District Court in Washington, D.C. The executives claim that the Office of Thrift Supervision acted in an arbitrary and capricious manner in deciding to shutter the thrift in January 2011. The executives want the court to reverse the failure.

The Office of the Comptroller of the Currency is acting on behalf of the now-defunct OTS, which the OCC absorbed in July.

In the 57-page document, the executives detail how documents uncovered through a tenuous discovery period show that the OTS and the Federal Deposit Insurance Corp. began discussing the $2 billion-asset thrift's failure in June 2010. At the time, the bank was stressed, but was not undercapitalized, and was working with Goldman Sachs to develop a recapitalization plan.

"Though the bank did not know it at the time, the OTS had already determined as of June 2010 to seize the bank," the filing said. "Documents initially withheld by defendants but later obtained in court-ordered discovery revealed the true picture: by June, the OTS had begun writing the memorandum to justify the seizure and was already in discussions with the FDIC over how to handle an 'orderly resolution'."

United Western was dealing with significant writedowns on a book of private-label mortgage-backed securities. But regulators took particular issue with the thrift's deposits, which were largely comprised of relationships with institutional depositors such as clearing services firms and trust companies. In the new filing, the executives argue that those depositors had provided United Western with "stable, low cost sources of deposit funds" and that regulators didn't have a problem with the long-time business plan until late 2009.

"That model was so strong that the bank survived the worst of the financial crisis and was positioned to re-emerge as a stronger institution, all while hundreds of other banks failed," the filing said. "Then, astonishingly, this relatively well-capitalized bank was seized, in one of the last acts of a discredited bank regulator soon to have its own doors shut."

Regulators were concerned that the thrift could face a liquidity crisis if any of those depositors withdrew their funds, but the executives argue that those depositors had provided written assurances that they had no plans to pull the accounts.

United Western had also hatched a somewhat complicated recapitalization plan, where it planned to buy Legent Clearing, a clearing firm, to stabilize its deposits. It was also in the process of completing a $200 million recapitalization. In October 2010, it had more than half of the money committed and reached the full amount shortly before failure. Initially, the recapitalization was contingent on the Legent deal but that stipulation was nixed in an effort to gain regulatory approval.

"The bank's efforts to allay the OTS's concerns were for naught," the filing said, citing documents uncovered during the discovery process about a Nov. 9, 2010, meeting between the OTS and the FDIC. "By the end of that meeting, the [FDIC's] board had voted to adopt a resolution accepting an appointment of the FDIC as receiver over the bank. The bank's course was set, even as the bank was in the midst of complying with the OTS's commands."

In early December, the filing said, the OTS ordered another round of writedowns on the thrift's securities. The $16.3 million hit pushed United Western's capital ratios into an undercapitalized range.

On Jan. 20, 2011, the executives told the OTS that they had reached the goal of raising $200 million; its lead investors had agreed to increase their investments and other investors were in various stages of signing commitments.

"In response, the [OTS] posed no question … and refused to offer any comments," the filing said. "The OTS did not believe, despite all the indications to the contrary, that the recent efforts demonstrated a realistic prospect of recapitalization."

The thrift failed the next evening. A unit of First Citizens BancShares in Raleigh, N.C., bought the thrift's assets and deposits from the FDIC.

"First Citizens would control the Bank's operations by Monday morning. It would go on to close four of United Western's former branches while enjoying a $65.5 million acquisition gain from the Bank's seizure," the filing said. "Meanwhile, the FDIC estimated that it would suffer a $312.8 million loss to the Deposit Insurance Fund."

United Western's lawyers declined to comment, as did the FDIC. The OCC did not immediately respond, but the agency typically does not comment on ongoing litigation.

The OCC's response is due May 18. From there, both the OCC and the executives will be able to reply once more in June.

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