More banks have failed in Georgia than any other state as
part of the current bank failure wave, but the FDIC had not yet filed a civil
action against the former officials of a failed Georgia bank - that is, until
now. On January 14, 2011, in what is the third FDIC lawsuit overall against
former officials of a failed bank as part of the current round of bank
failures, the FDIC filed a lawsuit against eight former officials of the failed
Integrity Bank of Alpharetta, Georgia. The FDIC's complaint can be found here.
UPDATE: As discussed further below, in
addition to the Integrity Bank case, the FDIC also filed a separate
lawsuit on January 14, 2011 in the Central District of California against
former directors and officers of the failed 1st Centennial Bank of Redlands,
Including one bank closed already in 2011, there have
been 52 bank failures in Georgia since January 1, 2008. Integrity Bank was one
of the first in Georgia to fail when it was closed
on August 28, 2008.
In some ways, it may come as no surprise that the FDIC
filed its first failed bank lawsuit in Georgia against officials from Integrity
Bank. As noted here,
the FDIC had successfully intervened in a derivative lawsuit brought by the
trustee of the bank's bankrupt holding company. In moving to intervene in the
trustee's lawsuit, the FDIC had said that it intended to file its own lawsuit
against former Integrity bank officials.
In addition, two former Integrity officials have already
drawn criminal charges involving activities at the bank, as discussed here.
One of the two indicted Integrity officials, Douglas Ballard, is also named as
a defendant in the FDIC's civil lawsuit. As noted here,
in July 2010, the two individuals entered criminal guilty pleas in the case.
As noted in Scott Trubey's January 18, 2011 Atlanta
Journal-Constitution article about the FDIC's civil suit,
among the former Integrity Bank officials names as defendants in the FDIC's
lawsuit is Georgia State Senator Jack S. Murphy, who was only
recently named as Chairman of the Georgia Senate Banking Committee. Another
defendant, Clinton M. Day, a former bank chairman, previously was a state
senator and was at one time the Republican Candidate for lieutenant governor,
and also once served on the Senate Banking Committee
The FDIC, which filed the lawsuit in its capacity as
Integrity Bank's receiver, seeks to recover "over $70 million in losses" that
the FDIC alleges the bank suffered on 21 commercial and residential
acquisition, development and construction loans between February 4, 2005 and
May 2, 2007.
The 56-page complaint, which names as defendants eight
former directors of the company who also served on the bank's director loan
committee, alleges one count of negligence and gross negligence, and one count
of breach of fiduciary duties.
Read the article in its entirety at the D&O Diary, a blog by