Complaint 4 26 13 Final - OakBridge Insurance Services

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Case 3:13-cv-01328-CCC Document 1 Filed 04/26/13 Page 22 of 31 69. Prior to the closing of the loan, Clema indicated to the Bank that it would be transferring the realty to its affiliate, Marat, LLC (Marat) and title would pass to Marat at the closing of the loan. This change was not approved by the Board of Directors. 70. The loan was secured by first, second, and third mortgages in the principal amounts of $6 million, $2.15 million, and $7.05 million, respectively, over the property to be developed. The loan was guaranteed by Clema and Cleofe Rubi and his wife, Moraima Cintron. The Bank violated its Loan Policy and prudent banking standards in its failure to conduct a diligent review of the borrower and guarantors’ ability to repay the loan. Clema was unable to meet the cash equity requirement. The Bank did not have information on the true borrower, Marat, a recently formed LLC. The Bank had incomplete and unaudited financial information on the guarantors. With the incomplete information, the Bank’s evaluation was based upon the guarantors’ net worth and not on the ability to repay the loan in the event of default. The Bank failed to note that the financial statements indicated that a guarantor was considerably overdrawn on their bank account and current liabilities significantly exceeded current and liquid assets. 71. At the time of loan origination, Clema had other loans from the Bank that were matured and/or with interest past due. There was no reference in the loan application that over half of the proceeds would be diverted to pay off the Clema debt and not used to complete the Marat development. The extension of a loan to an affiliate of a non-performing or delinquent borrower violated the Bank’s Loan Policy. On information and belief, the Plaintiff alleges that the Director Defendants either knew that Clema had non-performing loans and approved this loan in an attempt to give a false appearance to regulators and stockholders that performing loans had increased and non-performing loans had decreased, or in the alternative, that the Director Defendants did not even realize that the guarantor of a major loan had three non-performing loans with the Bank. Additionally, the Bank failed to calculate the total risk that this loan 22
epresented to the Bank because it did not take into consideration the aggregate number of loans to this one borrower. Moreover, the issuance of this loan violated the Bank’s legal lending limit to one borrower. Case 3:13-cv-01328-CCC Document 1 Filed 04/26/13 Page 23 of 31 72. The appraisal used to evaluate the collateral was over four years old and not prepared specifically for the Bank in violation of Loan Policy and federal regulations. As the economic condition and real estate market had changed since the appraisal was completed, the Bank did not take these factors into account at the time this loan. As a result, the 101 percent LTV ratio far exceeded the Bank’s Loan Policy and Interagency Guidelines. There was no evidence of property inspection, insurance, presales/lease commitments, review of the project and site, permits and studies, and evaluation of the contractor as required by the Loan Policy. 73. The Bank suffered a loss on this loan in an amount to be determined by the jury, but at this time estimated to be approximately $11.38 million. Such loss was proximately caused by the conduct alleged herein. VII. OVERALL INJURY TO THE BANK 74. The approval of each of the Loss Loans demonstrates the Director Defendants’ reckless disregard of sound underwriting practices. This reckless disregard happened not only in these loans but in other lending and general banking decisions made by the Director Defendants which injured the Bank, its stockholders, its depositors, and creditors. The Director Defendants were repeatedly warned of the problems at the Bank by internal and external auditors and by regulators, but the Director Defendants did not take sufficient actions to save the Bank from the harm of their decisions and inactions. The Bank’s underwriting deficiency with respect to securing valid, current appraisals was particularly pronounced. The Bank did not even have an appraisal policy until 2006 when its new Chief Lending Officer implemented one. And an independent consulting firm that reviewed the Bank’s reserve allocations in January 2010 23
Page 1 and 2: FEDERAL DEPOSIT INSURANCE CORPORATI
Page 3 and 4: Case 3:13-cv-01328-CCC Document 1 F
Page 5 and 6: 10. Defendant Pedro Feliciano-Bení
Page 7 and 8: A. Eurobank’s Rapid Growth and Ag
Page 11 and 12: the Joint Guidance and in the board
Page 17 and 18: of the loan to $4.4 million and ext
Page 19 and 20: financial data for at least the two
Page 21: 65. The loan was secured by a first
Page 25 and 26: VIII. CLAIMS FOR RELIEF Count 1 - G
Page 29 and 30: 82. The named defendant spouses and
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Complaint 4 26 13 Final - OakBridge Insurance Services

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