Bank sues state of Nevada
Silver State Bank which held bank accounts for failed Southwest Exchange of Henderson is suing the state of Nevada, seeking to recover damages related to lawsuits over Southwest Exchange.
Southwest Exchange, which had accounts at Silver State Bank, closed in January 2007 owning $98 million to real estate investors and is in receivership.
Attorneys for investors who lost money when Southwest Exchange failed are suing multiple defendants based on claims the defendants have some liability for the losses.
Silver State, one of the defendants, on Wednesday filed a third-party lawsuit and accused the Real Estate Division of the Department of Business and Industry of breaching its duty, because the division didn't revoke the registration of Southwest Exchange for violating civil laws.
"It's just a complete and utter failure to enforce the statute," said Randolph Howard, an attorney representing the bank. "The bank has rights here, too."
But a spokeswoman for the state agency disagreed.
"Silver State Bank does not have a right to pursue the actions that it has alleged against the Real Estate Division," Elisabeth Shurtleff, a spokeswoman for the state agency, said in an e-mail.
The cases stem from the failure of Southwest Exchange. Real estate investors relied on Southwest Exchange in order to defer income taxes on gains from selling properties.
A real estate investor typically would defer the taxes by directing the buyer to send money directly to an intermediary like Southwest Exchange.
Real estate investors are suing Southwest Exchange owner Donald McGhan and others, alleging that their money was illegally diverted.
In papers filed in Clark County district court, the Henderson-based bank argued that the plaintiffs shouldn't get a judgment against the bank.
Silver State also filed a third-party lawsuit against the Real Estate Division of the Nevada Department of Business and Industry, saying the state should reimburse it for legal expenses and compensate Silver State for a judgment if one is entered against Silver State.
Southwest Exchange was required to register with the Real Estate Division, and the division could have revoked Southwest Exchange's registration for several reasons, according to the bank's lawsuit.
The division should have known that Southwest Exchange's bank accounts were not set up as escrow accounts, the lawsuit said. In addition, the lawsuit said the division should have known that Southwest Exchange bank accounts were illegal because they didn't require a client's signature prior to diversion of a client's money from the bank account.
By not taking action against Southwest Exchange, the division breached that duty, the lawsuit said.
Silver State argued that it is exempt from any liability in the Southwest Exchange case under the Uniform Fiduciaries Act, in part because it didn't know client money was being stolen from the accounts.
Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.
