Lawsuit seeks to recover money lost in bank failures

Federal regulators have filed what may be the first of multiple lawsuits to recover hundreds of millions of dollars in losses resulting from the 2009 failures of Community Bank of Nevada and sister bank Community Bank of Arizona.

Community Bank of Nevada, with 12 local offices, had $1.52 billion in loans and other assets — many involving real estate ventures that defaulted on loans during the recession. Community Bank of Arizona, with four branches in the Phoenix area, had $158.5 million in assets.

A federal lawsuit filed July 13 in Phoenix accuses Edward Jamison of Las Vegas, CEO of the parent company of both banks, and other executives of negligence and breach of fiduciary duty for allegedly failing to manage Community Bank of Arizona in a sound manner.

The suit says the parent company, Community Bancorp Inc. of Las Vegas, purchased Community Bank of Arizona in 2006 and that almost immediately Jamison caused the Arizona bank to increase its concentration in risky commercial real estate loans.

Many of these loans involved developments in the Las Vegas area, and Jamison’s strategy involved transferring risky loans from Community Bank of Nevada to Community Bank of Arizona, the lawsuit said.

These risky loans harmed the Arizona subsidiary as 75 percent of the loan participations it purchased from Community Bank of Nevada became problem loans for the Arizona bank at the time of its failure, the lawsuit said.

The suit said Jamison’s justification for moving the loans from the Nevada bank to the Arizona bank was to reduce the Nevada bank’s high concentration of commercial real estate loans while producing additional revenue for the Arizona bank.

“The defendants who approved these purchases thus breached their fiduciary duties to Community Bank of Arizona by allowing Community Bank of Arizona to serve as a repository for Community Bank of Nevada’s problem assets, and they did so without conducting the most basic underwriting and due diligence required under Community Bank of Arizona’s loan policy, banking regulations and safe-and-sound banking practices,” says the lawsuit, which seeks at least $11 million in damages.

Jamison said Monday he didn’t have any comment on the lawsuit and referred questions to his attorney, Kevin Stolworthy.

“We’re going to vigorously defend it and take it to trial if necessary. There are two sides to every story and no one’s heard our story yet,” said Stolworthy, an attorney at the Las Vegas office of the law firm Armstrong Teasdale.

The FDIC hasn’t yet filed suit over its losses at Community Bank of Nevada. A request for comment was placed with the agency.

Further litigation seems possible given two things:

• The FDIC is already seeking $86 million in damages in a Las Vegas lawsuit against four officers of Henderson-based Silver State Bank, which failed in 2008 and, like Community Bank of Nevada, had extensive exposure to risky Southern Nevada real estate loans.

• The FDIC has already demanded $805 million from Community Bancorp headed by Jamison, records in its bankruptcy case show.

It’s understood in the banking community that the FDIC lawsuits generally are seeking recovery from the bankers’ officers and directors liability insurance policies.

Legal

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