Complaint 4 26 13 Final - OakBridge Insurance Services

Case 3:13-cv-01328-CCC Document 1 Filed 04/26/13 Page 13 of 31
36. The indiscriminate use of interest reserves funded by loan proceeds for certain of
the Loss Loans gave the false appearance to stockholders and regulators that the loans were
performing and the Bank was making income from these loans when, in fact, the funds were
simply recycled within the Bank. Generally, the borrowers had little or no equity in the project.
The risk with these transactions was borne almost entirely by the Bank and, as noted, came at a
time when the economic environment should have inspired the Director Defendants to exercise
greater caution in subjecting the Bank to credit risk. The Loss Loans are summarized below.
Skylofts
37. On February 27, 2006, the Director Defendants approved a $4.3 million loan to
Skylofts, Inc. to assist in the acquisition and development of land in Miramar, San Juan, PR, for
the Skylofts project, a 120-unit residential complex. The source of repayment was to be the
proceeds of an interim loan that would be procured at a later date for the construction of the
units. There was no commitment for a construction loan on file in violation of the Loan Policy.
There was no evidence that the Bank inquired or had discussion with the principals regarding
their ability to obtain such financing. The secondary source of repayment was identified as the
sale of the property or from the guarantors’ own resources.
38. The loan was secured by 1,782 square meters at the development site and
supported by the personal guarantees of Francisco Pujol, Zoila Levis and Caridad Fernandez.
Complete and current financial statements and tax returns were not provided for each guarantor
in violation of the Bank’s Policy. Despite the lack of complete financial information, the
guarantors were evaluated based on their net worth rather than their capacity to repay the loan in
the event of default. Their real estate holdings constituted the majority of their assets and net
worth, yet there was no analysis or verification of these holdings. There were no credit reports
on file for the guarantors. As Skylofts, Inc. was a recently-formed corporation, there were no
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