Thursday, April 5, 2012

Former Cape Fear Bank directors face lawsuit

Former directors and executives at the failed Cape Fear Bank in Wilmington were sued this week by the FDIC, claiming they failed to properly manage risk and did not heed regulators' warnings.

The FDIC seeks to recover $11.2 million in losses on 23 commercial real estate and development loans they approved between 2006 and 2009. The suit states that the directors and officers took on five new branches without a plan to monitor them, and were "enticed by the 'bubble' in the real estate sector" to grow more concentrated in high risk loans.

The bank failed in April 2009 under the weight of loan losses, costing the deposit insurance fund more than $141 million.

The suit says the bank's directors and officers were "ill-equipped" to manage the risk, and ignored warnings from regulators.

"Instead, they continued to choose short-term profits over prudent lending, betting that the demand for real estate in the bank’s chosen markets would continue indefinitely," the suit states.

The FDIC has sued former directors at several dozen failed banks, a signal that the regulator has become more aggressive.