FDIC sues directors of failed F’ville bank for $10.3M

The Federal Deposit Insurance Corporation has sued the former board of directors of the failed Southern Community Bank in Fayetteville, which it took over in June 2009.

The lawsuit is seeking $10.3 million in damages from the defendants including lost operating capital, lost profits and lost investment opportunities.

The lawsuit names former bank officer and director Gary D. McGaha of Suches, Ga. along with former bank directors James S. Cameron of Pensacola, Fla., George R. Davis Sr. of Fayetteville, Robert B. Dixon Jr. of Newnan, Richard J. Dumas of Fayetteville, William W. Leslie of Senoia, Jackie L. Mask of Fayetteville, Thomas D. Reese of Senoia and William M. Strain of Fayetteville.

The lawsuit claims the directors were negligent by “approving loans that violated the bank’s internal policies, regulations and/or prudent banking practices.”

Among specific violations, the lawsuit accuses the board of directors of failing to follow FDIC regulations by exceeding a loan limit of $100,000 to former bank chairman Reese on several occasions. The bank ultimately lost $1.64 million on a series of loans and credit extended to Reese and his companies, according to the suit.

According to the lawsuit:

• A $500,000 loan to Reese in July 2004, to secure debt on more than 20 acres of property in Fayette County, was approved by bank directors Dixon, Dumas, Leslie, McGaha and Strain.

• Five months later, in January 2005, a $400,000 loan was approved for Reese to buy 221 acres in Meriwether County. That final loan increased the bank’s total direct exposure to Reese above $2.3 million and was later increased by an additional $300,000 “for the purpose of providing Reese with additional working capital.”

• In April 2005, a $250,000 loan was approved for Reese Family Properties by bank directors Cameron, Davis, Dixon, Dumas, McGaha and Strain to build a boat dock and common facilities at a residential development in Hayesville, N.C. Bank director Reese was an owner and the chief executive officer of RFP and personally guaranteed the loan. This particular loan increased the bank’s exposure to Reese above $3 million.

• In May 2007, bank directors Davis, Dixon, Dumas, McGaha and Strain approved a $350,000 loan to Reese Developers Inc. to provide working capital. The company was completely owned and operated by Reese, who also personally guaranteed the loan. The loan was made despite a credit memorandum that indicated the company was experiencing financial stress, and the bank’s loan did not seek an appraisal of the Meriwether property used as collateral.

• A loss of $485,000 tied to a total of $5.77 million loaned to an unnamed borrower for construction of speculative homes in a residential subdivision despite a failure to demonstrate financial strength to service the loan or pay it off. No cash flow or debt service analysis of that borrower was conducted, and the loan committee learned of additional deficiencies yet subsequently approved an additional $485,000 to the same borrower. The collateral for this loan, listed as 2.5 acres of commercially-zoned land, was never appraised.

• A loss of approximately $2.7 million was tied to a $5 million line of credit in April 2006 issued to United International Mortgage Corp which was guaranteed by a another bank customer whose liabilities had surpassed $10 million.

• A loss of more than $2.6 million stemmed from a $4.5 million loan in October 2005 to refinance the existing debt of Vision 278, LLC despite multiple deficiencies of bank loan policy and prudent banking practices.

• A loss of approximately $1.9 million was the result of $4.75 million in funding to an unnamed corporation in September 2006 to purchase and develop 59.1 acres of property.

The FDIC also claims that the bank failed to adhere to regulations requiring written appraisals of property prior to advancing loan proceeds.

The lawsuit claims that the defendants’ actions and inactions “exhibit such a degree of carelessness and/or inattention as to constitute gross negligence under Georgia law.”

The trial is also seeking unspecified damages on top of the $10.3 million in specified damages.

What is truth
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Bank Directors & Developer Reese

"One persons irresponsibility becomes another persons responsibility." In the end the taxpayer citizens (FDIC) and Southern Community Bank Stockholders will bear the responsiblity of Mr. Reese & Southern Community Bank Directors irresponsiblity.

SPQR
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count your blessings

The feds are only seeking restitution in a civil court.

dar thompson
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The Banks

If the general public knew what was actually going on with banks and the things they are allowed to get away with there would be riots in the streets. Banks now are worse than the mafia.

Do you realize that you can own a commercial piece of property, have never missed a payment, and because a new appraisal comes in under what is owed the bank can foreclose on you. Whatever happened to what your parents taught you...pay your bills on time because credit is everything. Nope, doesn't matter. If you have a commercial building and it appraises for less than owed you have to pay the bank a lump some of money...in many cases $200,000 to $4000,000 or they can and will foreclose on you. Furthermore they can charge you 15% of the appraisal in attorney fees, regardless if they hire an attorney or not.

This is all happening while you and I, the tax-payer, are supporting their short-fall through our increased tax dollars. United Community Bank (formely Fayette County Bank) is one of the worst. On one particular property they retained the full monetary value, they were made whole on their total asset and then after the fact add another $500,000 to the price tag. If they have a loss, the government subsidizes them with yours and my tax dollars. But they are allowed to make all the money they want by purposely foreclosing on good paying customers

Regions is no better...they can create a problem, sale a foreclosed property they had no right to sale as they were pursuing a judgement on the previous owners (an ongoing case) and are required to disclose...which they did not. They had to hire an attorney to fix their problem (all due to their own negligence). Then 15 minutes before closing, send a fax to the closing attorney saying they will not release title unless buyer pays their attorney fees for the problem they created.

So picture this...bank makes a huge mistake...sales a property they had no right to sell and after four months of dealing with attorneys, buyer has to cover their attorney cost otherwise the closing can't take place. The Banks are like the mafia, they take no responsibility for their actions and push all cost onto the consumer.

As I said...if people knew what the banks were doing to people and with such arrogant attitude "well just sue us"...the general public would come unglued.

In closing, I go to Chicago Title (Title Insurance)to get my refund of a large amount of money that is owed. Chicago Title's response is to go pound sand...if you don't like it sue us. One prominent attorney that worked for a bank said they were specifically were told to never settle anyting and always take everything to trial. This was for the simple reason the banks understand that most people don't have or don't want to risk spending $200,000 plus just to fight a case.

The public should really do some investigation to how the banks are treating customers and the federal government lets them get away with it and actually props them up.

It is truly unbelievable...and this is just the tip of the iceberg.

SPQR
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DAR

flash back to 1971. Had an checking account with the old Citizens and Southern Bank in Atlanta. They bounced a check in error.It caused me extreme difficulty and financial hardship. Wound up in court. Bank admitted to the error under questioning by my attorney. I naively thought i could seek restitution. That's when I learned at an early age that banks are predators protected by laws that they wrote.

Robert W. Morgan
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Yes the banks are predators. Check out Indy Mac

or specifically the guys that took over Indy Mac Bank in California several years ago. It is hard to find and I don't have a link now, but I recall that their deal was that they bought the assets (the loans - mostly residential) and the name of the bank for about 60% of book value and then worked out a deal where they got back 120% of their losses from the feds should they have to foreclose. Naturally this gave them an incentive to foreclose and they started that new appraisal scam dar mentioned and got away with that for a couple years. These people were true criminals, but they didn't get prosecuted because the federal government enabled them and even encouraged them.

Robert W. Morgan
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I don't know whether to cheer or cry

On one hand, these dudes spread money around their brethren without using normal lending guidelines.

On the other hand, the federal government (big time abusers themselves) suing these people for $10 million (individually and severally, which means the richest one may get tagged for the whole amount) bothers me because it seems as if the FDIC has no insurance role as they always advertise and then they will (or may) recover some money after ruining some people and not do anything to improve the property in question. Instead, the property will still wither on the vine and the $10million will go into the general fund and be spent mostly on social programs.

I am really conflicted about this.

moelarrycurly
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Bank directors

These dudes aka defendants, according to the article above...

William Strain M.D., a partner in Atlanta Gastroenterology who practices here in Piedmont Fayette Hospital with Grybowski and Burney and others?

Jame S. Cameron, a practicing attorney in Fayetteville?

Gary D. McGaha, former chairman of the Fayette County Chamber of Commerce, former member of the Fayetteville Dpwntown Development Authority, and former board member of the Joseph Sams School?

Thomas D. Reese of Senoia, developer behind the McIntosh development in Coweta on the other side of Lake McIntosh that is now owned by the Mormons.

http://www.ajc.com/news/business/bank-developer-went-down-together/nQmB8/

Richard J Dumas, president of J & R Clothing?

Jackie L. Mask, owns Mask Tire Co. in Fayetteville?

George R. Davis, of Smith & Davis?