FDIC Suit Against Failed Bank's Officers Terms Communicom Refi Loan 'Improper'
January 27, 2014 at 4:00 AM (PT)
One of the loans termed "improper" by the Federal Deposit Insurance Corp. in a lawsuit against some of the former officers and directors of the now-closed UNITED WESTERN BANK of DENVER was to radio group COMMUNICOM, with borrowed $11.25 million to refinance four stations (KXXT-A and KXEG-A/PHOENIX, WDRJ-A/DETROIT, and WLNO-A/NEW ORLEANS).
The FDIC is suing six of the bank's former officers and three former bank board members in U.S. District Court in DENVER, alleging that they are responsible for over $76 million in improper loans and over $35 million in damage to the bank.
The 17 loans in question, made between 2006 and 2009, all defaulted. The case is FDIC (as Receiver for UNITED WESTERN BANK) vs. CHARLES J. BERLING, JAMES H. BULLOCK, ANTHONY C. CODORI, BERNARD C. DARRÉ, GARY G. PETAK, WILLIAM D. SNIDER, CINDY J. STERETT, JOHN S.UMBAUGH and SCOT T. WETZEL, and, according to the complaint, "does not seek to collect from UWB’s borrowers or guarantors on any unpaid loans, but rather seeks to collect from the Defendants the damages caused by their negligence, gross negligence, and breaches of fiduciary duties."
The COMMUNICOM loan was approved by all of the defendants but UMBAUGH; the complaint notes that the borrowers "had very little experience operating the PHOENIX and DETROIT radio stations when they requested financing from UWB" and were refinancing existing debt owed to MCG CAPITAL CORP. and that "the borrowers were located outside of the Bank's market area and were not creditworthy," with combined net income of negative $858,606 in 2006 and negative $26,110 in 2007 and less-than-adequate liquidity plus a low cash equity contribution -- just $22,500, or 0.2% -- towards the refinancing.