AJC: Federal lawsuit filed against insiders of state’s largest failed bank

I’ve written a lot about Georgia’s banking crisis, and here’s another post on it.

According to the AJC this morning:

Federal bank regulators sued 17 former directors and officers of Silverton Bank on Monday, accusing the officials of gross negligence and corporate waste in the biggest bank failure in Georgia history.

The Federal Deposit Insurance Corp., in a 102-page civil lawsuit, accuses the bank of slipshod lending practices that violated its internal controls, and for spending lavishly as the bank’s condition worsened and the economy teetered on the brink of collapse.

Among the spending, a posh $35 million Buckhead headquarters building called The Medici, complete with 26 conference rooms. The bank spent millions more for an aircraft hangar and two new airplanes, according to the lawsuit.

The suit also contends the bank’s former CEO glossed over problems and that the bank “ignored ominous warning signs in the economy,” pursuing growth in real estate loans into 2009 as the economy fell into the nation’s worst ever recession.

A huge bank that did banking for banks, Silverton fueled crises at other institutions (who were more than happy to play along, obviously):

Banks locked in no-growth areas often linked with Silverton to take part in loans in hot real estate markets like California, Arizona, Florida and metro Atlanta. Silverton made loans and sold off chunks called participations to other, smaller institutions.

Silverton pursued a high-growth strategy, and did much of its lending business in real estate development, trying to become the largest banker’s bank in the country, the suit says.

The FDIC alleges loan officers were paid bonuses for quantity of loans produced, not quality.

There is much more in the piece.