FDIC sues former Orion Bank directors, seeks $53M
The Federal Deposit Insurance Corp. has sued four former directors of Orion Bank in Naples, saying they should pay it millions for allowing the former CEO to "drive the bank into failure."
The federal lawsuit, filed in U.S. District Court in Fort Myers on Jan. 29, alleges that Jerry Williams, the bank's ex-CEO and president, was able to carry out his "reckless growth strategy" largely because the directors "never made more than token attempts to monitor, supervise and restrain him."
The FDIC seeks damages and demands a jury trial.
The four directors named in the suit, living on the east and west coasts of Florida, are James Aultman of Marathon Beach, Earl Holland of Fort Myers, Alan Pratt of Vero Beach, and Brian Schmitt of Marathon.
Lawrence Kellogg, a Miami attorney who represents the directors, said the allegations in the lawsuit are "unfounded," and that they contradict what the FDIC told the court in a criminal case that put Williams in prison for six years for his lead role in a bank fraud conspiracy.
"The former directors were victims of a fraud perpetrated by the president of Orion and certain of its employees. At Jerry Williams' restitution hearing, the FDIC told the federal court that 'Mr. Williams was the one person at Orion that had the power to stop the illegal acts. Instead, he actively concealed the facts regarding these transactions from Orion's outside directors.' The directors agree with the FDIC's prior representation to the court," Kellogg said in an email Wednesday.
The directors will "aggressively defend the case and prevail," he said confidently.
At a restitution hearing in Orlando in August, a federal judge ordered Williams to pay more than $31 million in restitution to the FDIC, which became the receiver for the local bank when it failed. The amount was based on the losses the FDIC suffered when it took over the bank's fraudulent loans after selling most of Orion's assets to IberiaBank.
Williams and his co-conspirators made the loans as part of a scheme to trick regulators into thinking the bank was in better financial shape than it was as it teetered on the edge of collapse.
The four men the FDIC sued were all directors when Orion failed and they also sat on the bank's loan committee. As members of that committee, the lawsuit alleges, they had a duty to "diligently review and independently evaluate proposed loans," but instead they "blithely rubber-stamped any loan that Williams proposed without meaningful review or deliberation."
"The defendants even often approved extremely large and complex loans after less than four minutes of review and discussion, making clear that the defendants habitually approved loans after only the most cursory review," the lawsuit says.
The directors only "reinforced Williams' dominance," and their lack of oversight was so obvious that Williams began boasting about the fact that they would "never reverse his decisions," the FDIC alleges.
The FDIC seeks to recover more than $53 million in losses from the directors for what it describes as their "gross negligence."