FDIC Sues Four Former Officers Of Irwin Union Bank And Trust For $42 Million

The FDIC is suing four former officers of Irwin Union Bank and Trust for negligence, gross negligence and breach of fiduciary duty for their roles in approving 19 loans during a four-year period, all outside of Indiana, that helped contribute to the failure of Indiana's oldest bank. The lawsuit was filed in the federal district court for the Southern District of Indiana. The officers being sued include Bradley Kime, Duncan Burdette, Kim Roerig and Michael Waters. According to the lawsuit filed in the Southern District of Indiana, FDIC is seeking to recover at least $42 million lost as a result of the poorly underwritten loan.

A scathing complaint, alleges the four officers approved loan transactions that "suffered from multiple and egregious deficiencies that made the risk of loss clear." 'Not a single loan contained an analysis of credit information that was sufficient to ascertain the adequacy of cash flows to service the loans or to identify a clear repayment source." The loans violated the banks appraisal standards, contained loan-to-value ratio violations, failed to properly value collateral and lacked current financial statements from the borrowers and guarantors according to the complaint.

The Indiana Department of Financial Institutions closed the bank on September 18, 2009 with $2.8 billion in assets and FDIC-insured losses of $934.3 million. The thrift alter ego of the bank that made the loans outside of Indiana was closed by OTS with $518 million in losses and $161.3 million in FDIC-insured losses. The 19 loans that are the focus of the lawsuit were made in six markets--Phoenix, Arizona; Sacramento, California; Las Vegas, Nevada; Milwaukee, Wisconsin; Kalamazoo, Michigan; and Indianapolis.

The IBJ has a feature story here (subscriber-only) that opens by saying the lawsuit alleges the four former officers "closed their eyes to known risks in approving loans that contributed to the banks’ 2009 takeover by regulators."