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 38 of 97<br />
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combined personal liabilities of $9,145,039. That amount plus <strong>City</strong><br />
<strong>Bank</strong>'s commitment of $11,036,000 to Related Entity D <strong>and</strong> the Borrower<br />
D Loan totaled $33,957,839. The guarantors' combined c<strong>as</strong>h <strong>and</strong> c<strong>as</strong>h<br />
equivalents equaled only $2,294,179, which w<strong>as</strong> approximately 6.8<br />
percent of their total related debt <strong>and</strong> <strong>City</strong> <strong>Bank</strong> loan commitments.<br />
Although the guarantors' <strong>as</strong>sets were listed at $36,090,127, 81.9 percent or<br />
$29,554,900 of that amount w<strong>as</strong> illiquid equity in various closely-held<br />
companies <strong>and</strong> real estate holdings. When Defendants approved the<br />
Borrower D Loan, the Real Estate Bubble had burst more than 11 months<br />
earlier, <strong>and</strong> Guarantors D-1, D-2, D-3, <strong>and</strong> D-4 had insufficient liquid<br />
<strong>as</strong>sets to repay the Borrower D Loan.<br />
d. Failed to consider or knew of <strong>and</strong> disregarded the LTV ratio limit<br />
violation of the Borrower D Loan. The supervisory LTV ratio limit <strong>for</strong> a<br />
multi-family residential construction loan w<strong>as</strong> 80 percent. The Loan<br />
Memo stated that the discounted value of the collateral w<strong>as</strong> $15,352,035,<br />
which results in an LTV ratio of 89.7 percent.<br />
e. Failed to obtain or require a written appraisal be<strong>for</strong>e they approved this<br />
loan. The Loan Memo stated, "Valuation of the property w<strong>as</strong> prepared in<br />
narrative <strong>for</strong>m . . . . Verbal values were received on 6/04/07 with hard<br />
copy to follow." Sheehan <strong>and</strong> <strong>Hanson</strong> approved the Borrower D Loan on<br />
June 6, 2007, <strong>and</strong> June 7, 2007, respectively. The appraiser's cover letter<br />
<strong>for</strong> the appraisal is dated June 20, 2007.<br />
f. Failed to en<strong>for</strong>ce or require compliance with the Loan Policy's debt-toworth<br />
limit of 4 to 1. The Loan Memo showed that Borrower D had $0 in<br />
business <strong>as</strong>sets <strong>and</strong> liabilities. There<strong>for</strong>e, Borrower D did not have a debtto-worth<br />
ratio that complied with the <strong>Bank</strong>'s Loan Policy.<br />
110. In or about January 2009, Borrower D defaulted on the loan.<br />
COMPLAINT - Page 38<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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