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 50 of 97<br />
148. The Loan Memo provided that the security <strong>for</strong> the Borrower G (III) Loan w<strong>as</strong> to<br />
be the project's two SFRs <strong>and</strong> one multi-family residence.<br />
149. <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 G (III) Loan because<br />
they, among other things:<br />
a. Failed to require Borrower G to contribute any hard equity to the project.<br />
The Loan Memo <strong>and</strong> the Loan Officer Analyses <strong>for</strong> the Borrower G (III)<br />
Loan showed that the estimated total cost of the project, inclusive of<br />
interest <strong>and</strong> financing-related fees <strong>and</strong> expenses, w<strong>as</strong> $1,837,299.<br />
Defendants approved the Borrower G (III) Loan <strong>for</strong> $2,156,000.<br />
Borrower G, there<strong>for</strong>e, w<strong>as</strong> not required to contribute any equity to this<br />
project.<br />
b. Failed to consider or knew of <strong>and</strong> disregarded Borrower G's inability to<br />
repay the Borrower G (III) Loan, even though the January 9, 2008 Loan<br />
Policy stressed the importance of liquidity in the composition of net worth.<br />
The Loan Memo showed that <strong>City</strong> <strong>Bank</strong>'s total loan commitment to<br />
Borrower G, including the Borrower G (III) Loan, w<strong>as</strong> more than $10.5<br />
million. Borrower G's c<strong>as</strong>h balance equaled only 1.4 percent of this<br />
aggregate loan commitment. The Loan Memo also provided that<br />
Borrower G's net worth w<strong>as</strong> only $684,347. Although the Loan Memo<br />
listed the value of Borrower G's <strong>as</strong>sets at $7,311,047, 98.0 percent or<br />
$7,163,823 of those <strong>as</strong>sets consisted of illiquid real estate inventory <strong>and</strong><br />
fixed <strong>as</strong>sets. When Defendants approved the Borrower G (III) Loan, the<br />
Real Estate Bubble had burst about 19 months earlier, <strong>and</strong> the borrower<br />
had insufficient liquid <strong>as</strong>sets to repay the Borrower G (III) Loan.<br />
c. Failed to consider or knew of <strong>and</strong> disregarded Guarantors G-2 <strong>and</strong> G-3's<br />
inability to repay the Borrower G (III) Loan, even though the January 9,<br />
COMPLAINT - Page 50<br />
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