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4 THE CHEROKEE LEDGER-NEWS NEWS NOVEMBER 7, 2012 Becky Babcock 770-851-5595 $ 39 One Hour Massage 770-516-2141 • www.MASSAGEINNERCIRCLE.com Sharity C. Nesnick; LMT - GA License #MT003608 Hennessy Honda .com nnn FDIC sues former local bank CEO BY ERIKA NELDNER editor@ledgernews.com In a federal lawsuit filed late last month, a former Woodstock banker is accused of gross negligence and negligence that the Federal Insurance Deposit Corporation says led to the bank’s failure. Pierce Neese, director and chief executive officer of the former United Security Bank (Bank of Woodstock) is being sued in the United States District Court for the Northern District of Georgia. The lawsuit brought by the FDIC, as receiver for United Security Bank, was filed Oct. 23. Calls to a phone number listed for Neese went unanswered. The lawsuit comes almost three years from when the Georgia Department of Bank and Finance closed the bank on Nov. 6, 2009, and appointed the FDIC as receiver. United Security Bank opened in the 1970s in Sparta, later FROM STAFF REPORTS Veterans Day is Sunday, and expanding into Woodstock in 2002. The lawsuit contends that United Security Bank operated as a “one-man bank” from 2002 to early 2006 — in 2006 the bank established a three-person loan committee. “Even after establishment of a three-person (loan committee) at the direction of regulators, Neese continued to dominate the bank’s lending function due to a lack of sound internal controls, and he functioned, in effect, as the bank’s ‘one-man’ loan committee until the bank failed,” the lawsuit states. The lawsuit alleges that, while Neese was charged with operating and managing the bank, he “allowed irresponsible and unsustainable rapid asset growth concentrated in high-risk acquisition, development and construction (ADC) loans and purchased loan participations without adequate credit administration and local events are planned throughout the county. • The Thomas M. Brady Jr. American Legion Post 45 in Canton will host a Veteran’s Day parade Nov. 10, at 1 p.m., in the Historic Downtown Loop in Canton. The theme is “Celebrating veterans for defending our freedom.” Spectators and the veterans participating are asked to go to the historic marble courthouse after the parade for a special program and thank you to veterans; • Nov. 11, 7 p.m. to 8 p.m., The Park at City Center: The city of Woodstock and the Maj. Gen. Warren R. Jobson Marine Corp League Detachment No. 1311 in Woodstock will host a special Veteran’s Day candlelight ceremony in the park, 101 Arnold Mill Road. This year’s ceremony will recognize the 50-year anniversary of the United States’ involvement in Vietnam. There also will be an opportunity to respectfully retire dirty, 770-919-8825 (o) • 678-777-7561 (c) • www.CCoronaSells4U.com 2370 Towne Lake Pkwy., Ste 100, Woodstock 30188 103 CRABAPPLe COURT $158,900 903 Crabapple Court, Woodstock 30188. 3BD/2BA. Ranch w/ porch. Full unfinished bsmnt w/ boat door! Garage! Private Yard! Convienent to 575 & 400! Award winning schools! FMLS 5068725 3-4 BR, 2.5 BA, this beautiful home features hardwood floors in the main living area, Granite Kitchen, Fireplace in Great Room and Master. Finished Basement. SECOND Garage-Workshop! FMLS 5079407 loan underwriting policies …” According to the suit, the bank grew its total assets by 500 percent, from $3 million as of Dec. 31, 2002, to $154 million as of Sept. 20, 2009, with the ADC loans as “its primary source.” The lawsuit cites 16 loans, totaling $13.47 million, in which the bank failed to follow policies, including credit checks, loan underwriting and appraisals. The lawsuit contends that the bank pushed for high-risk acquisition, development and construction loans and “purchased loan participations without adequate credit administration and loan underwriting policies and practices to manage the risks …” Federal regulators also allege that the bank, under Neese’s management, violated the bank’s loan policy and banking recommendations. The FDIC has demanded a jury trial and is seeking compensatory and other damages. Veterans Day events planned in Cherokee torn and worn American flags by dropping them off at the dropbox in the park or in the parking lot of the fire department (225 Arnold Mill Road); • Union Hill United Methodist Church is hosting a complimentary “Breakfast with Veterans,” Nov. 11, at 9:30 a.m. in the Fellowship Hall. All veterans, friends, family and the community are invited. The church is located at 2000 AJ Land Road, Canton; and • Veterans are invited to the Cherokee County Historical Society (CCHS) Museum’s “USO Canteen,” Nov. 12, from 10 a.m. to 3 p.m. Veterans are invited to come in for free coffee and doughnuts and a tour of the special moonshine exhibit. The CCHS Story Catchers will be there to record wartime stories from those willing to share their memories. The museum is located in the historic, marble courthouse, 100 North St. in downtown Canton. This week at ledgernews.com • In a special called meeting, the Cherokee County Board of Commissioners and Resource Recovery Development Authority discuss nine firms as potential hires for forensic audit of Ball Ground Recycling; • Huntington Learning Center in Woodstock celebrates American Education Week; • Board of Education hosts boundary public hearings; • American Legion seeks oratorical contest participants; • Holly Springs Police Officer honored by nonprofit; • County parks and recreation department launches adopt-asenior program; and • Veterans can get free respiratory risk assessments and discounted lung cancer screenings at WellStar. Cindy R. Corona Realtor® Be HOMe FOR THe HOLIDAY OPeN HOUSe: SUN., NOV. 11, 2-5PM IN CRABAPPLe FALLS SUBDIVISION Swim/Tennis/Playground/Fishing Lake. A wonderful place to live & play! Come visit this great neighborhood & these great homes! You have time to move in for the holidays! 133 PLANTATION TRACe $185,000 136 PLANTAION TRACe $179,900 NEWLY RENOVATED! 3 BR, 2.5 BA home, hardwood floors on main, granite kitchen, granite in bathrooms, NEW CARPET! NEW INTERIOR PAINT! Hardiplank Siding! FANTASTIC! FMLS 5080550
NOVEMBER 7, 2012 NEWS THE CHEROKEE LEDGER-NEWS 5 Woodstock’s bond rating lowered BY JANET PELLETIER janetp@ledgernews.com General obligation bonds downgraded three notches from AA- to A- Overspending of reserves has led Standard & Poor’s to reduce the city of Woodstock’s bond rating three notches, from AA- to A-, reporting the city has a “stable” financial outlook. The financial services company, which publishes research and analysis on stocks and bonds, said its new rating for Woodstock was based on the city’s “overspending (of) its available reserves in 2010 and 2011, resulting in negative general fund reserves, which could leave it vulnerable to future shocks,” according to S&P credit analyst Lindsay Wilhelm. Wilhelm said Woodstock was last reviewed in September 2010, which was for a new bond issue. “That is a pretty significant rating change,” she said of the new rating, which was announced recently. Woodstock City Manager Jeff Moon said given the last five years of the economy and a declining tax digest, he wasn’t surprised by the downgrade. “Many cities and Moon counties throughout the country have been downgraded during the past three to four years,” he said. The lowered rate will have no impact on taxpayers for the existing bonds, he said, but while the city still carries an investment grade rating, the downgrade could cause the city to pay a higher interest rate on future bond issues. “We don’t have any future bond issues planned,” he said. “We are committed to eliminating the negative fund balance no later than next fiscal year, if not earlier. At that time, we have every reason to believe that we would be upgraded, based upon the S&P report.” Karl Jacob, a senior director with S&P, said most municipalities they review fall in the A range. The S&P ratings range from AAA to D. Included in the A range are AAA, AA and A. According to definition, an A is described as having a “strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances,” while an AA is described as having a “very strong capacity to meet financial commitments.” “With these general obligation bonds, the average rating is about an A+ across the country, so (Woodstock’s) would be two notches below that,” Jacob said, adding that 60 percent of entities they rate are in the A category. In comparison, the city of Canton has an A rating, while Holly Springs and Ball Ground don’t have bond ratings. Asked what effect a threenotch decrease can have on a municipality, Jacob said it can affect how the bonds trade in the secondary market. “If you have a lower credit rating, it’s assumed you have a higher risk,” he said. “The purpose of the credit report is really two-fold — the first is to go to the investors and say where we are with the credit, but it’s also to let the issuer know exactly where we see the strengths and weaknesses. Some of these reports, they go back and make attempts to take corrective actions and some don’t. It depends on the issuer and how they plan to use the report.” According to the full report on Woodstock’s Urban Redevelopment Agency bond on the water and sewer system, the city’s negative reserve position is attributed in large part to a recordkeeping error that overstated unaudited general fund reserves in fiscal year 2010, causing the city to overbudget capital and operating expenses the following fiscal year. “The city budgeted for the expenditure of reserve funds in the fiscal year 2011 budget (July 1, 2010 – June 30, 2011),” Moon explained. “When the general fund was reimbursed for prior sewer expenditures (Rubes Creek Water Reclamation Facility) as part of the 2010 bond issue, the reimbursement was erroneously reflected as revenue in the budget process.” The error wasn’t discovered until the annual audit after the end of the fiscal year, he said, with the end result being an operational deficit that year and a negative general fund balance of $827,000. Former Woodstock Chief Financial Officer Henry Bucci resigned under pressure in January after the failure in reporting, among other errors identified in two separate outside audits. Since Bucci’s exit, Moon has said the city has put in place several measures as corrective action to improve cash flow position. The city employed an outside auditor early this year, who shared at a City Council meeting in February that city staff has nnn begun using a new checklist of procedures to follow. According to S&P’s report, Woodstock, after discovering the error in accounting, delayed budgeted capital spending to fiscal year 2012, to be paid from a new Special Purpose Local Option Sales Tax (SPLOST) cycle, cut department budgets by 10 percent, postponed filling open positions and refinanced certain debt through the Georgia Municipal Association for interest cost savings. The S&P report said the city’s unaudited results for the current fiscal year show that there is some stabilization in financial position. “Seeing that it’s stable, we aren’t expecting any real change in the next two to three years,” Wilhelm said. “In this case, they had a one-time kick to their reserves, and based on our conversations, it sounds like it’s going to take a couple of years to build back up the reserves that were depleted.” SEE RATING, PAGE 12 Three Locations 451 Toonigh Rd., Woodstock, 770-517-4133 9504 Hwy 92, Woodstock, 678-494-0204 10515 Alpharetta St., Roswell, 770-992-2223 MikeTheMechanic.com • Complimentary car wash with every service • Onsite rental cars Hair by Gayla Salon FREE www.HairByGayla.com 678-908-4877 1105 Parkside Lane, Ste 1000-26, Woodstock 30189 FREE Towing For Any Repair Additional charge over 10 miles. Exp 11/30/12. BRAKE SPECIAL $30 OFF + tax & EPA fees Reg. Price $ 17099 PER AXLE Hi-perf., European imports & trucks extra. Resurfacing within tolerances & relining. Most vehicles. Exp 11/30/12. Hair Cut w/any Chemical Service New Clients Only FREE Windshield Wiper Blade Set w/purchase of $125 or more Restrictions Apply. Must present coupon. Exp 11/30/12. FREE Rental Car Must replenish fuel usage. All work must be pre-approved. Minimum $100 repair, certain restrictions apply. Must present coupon. Exp 11/30/12.
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