Federal regulators have sued to recover more than $11 million in losses resulting from the failure of Community Bank of Arizona, a subsidiary of Las Vegas-based Community Bancorp Inc.
Community Bank of Arizona and its sister bank, Community Bank of Nevada, failed on Aug. 14, 2009, according to the Federal Deposit Insurance Corp. The bank, with four branches in the Phoenix area, had $158.5 million in assets.
The FDIC’s lawsuit names Edward Jamison of Las Vegas, the former CEO of the parent company of both banks, and six other executives – all in Arizona – who are accused of negligence and breach of fiduciary duty for allegedly failing to manage Community Bank of Arizona in a sound manner. Community Bancorp filed bankruptcy in May 2010.
The 25-page lawsuit claims Jamison oversaw an immediate increase in risky commercial real estate loans after the parent company purchased Community Bank of Arizona in 2006. Many of those loans involved commercial developments in Southern Nevada, the FDIC said in court papers.
Jamison’s strategy involved transferring risky loans from Community Bank of Nevada to Community Bank of Arizona, according to the lawsuit. From November 2006 until its failure, Community Bank of Arizona acquired about $84 million in loans, 98 percent of which were for commercial real estate, the lawsuit said.
Jamison was unavailable for comment Monday. His attorney, Kevin Stolworthy, a partner in the Las Vegas office of Armstrong Teasdale, said, “we are going to vigorously defend it and contest the allegations.”
Stolworthy said there are always “two sides to every story.”
During six months in which Jamison was president and CEO of Community Bank of Arizona, the bank purchased more than $34 million in loans from Community Bank of Nevada, according to the lawsuit filed July 13 in U.S. District Court in Phoenix.
The lawsuit said Jamison’s justification for moving the loans was to reduce the Nevada bank’s high concentration of commercial real estate loans, while also “providing additional revenue” for the Arizona bank.
The FDIC hasn’t filed suit over losses at Community Bank of Nevada. An FDIC spokesman was unavailable for comment on Monday.
Community Bank of Nevada had total assets of $1.52 billion and 12 local offices when it failed. The FDIC did not find a buyer for Community Bank of Nevada and spent months overseeing the transfer of accounts to other financial institutions and mailing checks to customers with CDS and IRAs.
Stolworthy would not say whether Jamison has been employed since the failure.
The FDIC has sued other former executives of failed Las Vegas banks.
In February, federal regulators sued four officers of failed Silver State Bank for $86 million. The Henderson-based bank failed in 2008 under the weight of too many failed commercial real estate loans.
The lawsuit targets Corey Johnson, co-founder; Douglas French, executive vice president of lending; Gary Gardner, senior vice president and loan officer; and Timothy Kirby, assistant vice president and loan officer.
French settled a separate FDIC lawsuit in December. He agreed to pay $35,000 to resolve allegations he engaged in unsafe banking practices, which led to the failure of Silver State Bank.
Contact reporter Chris Sieroty at firstname.lastname@example.org or 702-477-3893.