FDIC as Receiver for City Bank vs. Conrad D. Hanson and ...
FDIC as Receiver for City Bank vs. Conrad D. Hanson and ...
FDIC as Receiver for City Bank vs. Conrad D. Hanson and ...
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C<strong>as</strong>e 2:13-cv-00671 Document 1 Filed 04/15/13 Page 36 of 97<br />
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with an aggregate commitment of over $11 million to an entity ("Related Entity D") that w<strong>as</strong><br />
related to Borrower D.<br />
105. Between June 2007 <strong>and</strong> October 2008, the <strong>Bank</strong> disbursed all of the Borrower D<br />
Loan.<br />
106. The Loan Memo <strong>for</strong> the Borrower D Loan stated that the purpose of the loan w<strong>as</strong><br />
to fund the construction of 25 zero-lot-line townhomes located in the Capitol Hill area of Seattle.<br />
A zero-lot-line townhome is a townhome that h<strong>as</strong> at le<strong>as</strong>t one exterior wall built right on the<br />
property line. The Loan Memo also provided that a portion of the proceeds of the Borrower D<br />
Loan would be used to repay an acquisition <strong>and</strong> construction loan from First Horizon <strong>Bank</strong>. The<br />
Loan Memo did not reveal the balance of the loan held by First Horizon <strong>Bank</strong>, but the<br />
Disbursement Request <strong>and</strong> Authorization <strong>for</strong> the Borrower D Loan, dated June 7, 2007, provided<br />
that $5,000,000 w<strong>as</strong> to be paid to Fidelity National Title on Borrower D's behalf.<br />
107. The Loan Memo provided that the primary source of repayment w<strong>as</strong> to be the sale<br />
of the units <strong>and</strong> that the secondary source of repayment w<strong>as</strong> to be the <strong>as</strong>sets <strong>and</strong> income of the<br />
guarantors.<br />
108. The security <strong>for</strong> the Borrower D Loan w<strong>as</strong> to be the project's 25 townhomes.<br />
109. <strong>Hanson</strong> <strong>and</strong> Sheehan engaged in imprudent, unsafe, <strong>and</strong> unsound lending<br />
practices <strong>and</strong>/or violated the Loan Policy when they approved the Borrower D Loan because<br />
they, among other things:<br />
a. Failed to consider or knew of <strong>and</strong> disregarded the fact that the amount of<br />
the Borrower D Loan exceeded the project's hard costs <strong>and</strong> the cost of the<br />
l<strong>and</strong> by more than $4 million. The Loan Memo showed that the estimated<br />
combined hard costs <strong>and</strong> cost of the lots totaled $9,598,896. The<br />
Borrower D Loan, however, w<strong>as</strong> a commitment of $13,776,800. The<br />
Loan Memo did not explain how Borrower D w<strong>as</strong> going to use the extra<br />
$4,177,904—which amounted to 43.5 percent of the estimated lot <strong>and</strong><br />
construction costs. The excessive amount of the Borrower D Loan made it<br />
COMPLAINT - Page 36<br />
ATER WYNNE LLP<br />
1652284/1/SKB/105030-0018 601 UNION STREET, SUITE 1501<br />
SEATTLE. WA 98101-3981<br />
(206) 623-4711
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