Former Silver State executive charged with misconduct

Federal regulators charged a former local bank executive Friday with misconduct for his role in the failure of Silver State Bank, which was seized in September 2008.

The Federal Deposit Insurance Corp. accused Douglas E. French in a 26-page complaint of being associated with bad loans that cost the Henderson-based real estate lender more than $10 million.

In the complaint issued Dec. 17 but made public Friday, the FDIC said it was seeking a fine of $125,000 and barring him from working at any FDIC-insured bank without prior approval from the FDIC or other federal regulators.

"The FDIC has determined that (his) violations, reckless unsafe or unsound practices and/or breaches of his fiduciary duty were part of a pattern of misconduct ... likely to cause more than a minimal loss to the bank," the complaint said.

French was the bank's executive vice president and real estate manager until he resigned on May 15, 2008. The FDIC sized Silver State, a subsidiary of Silver State Bancorp, about four months later.

"The FDIC complaint is no more than a series of unsubstantiated claims cobbled together in an effort to find a scapegoat for the collapse of Silver State Bank," French said in a statement. "(The) FDIC has unfairly singled me out even though the practices and procedures I followed at the bank were industry standard, reviewed by FDIC examiners at the time and made in the best interest of the bank. I strongly believe that I acted appropriately based on what was known and reasonably foreseeable at the time."

French, who is currently president of the Ludwig von Mises Institute, declined to comment beyond his statement. Based in Auburn, Ala., the institute describes its mission as "advancing the scholarship of liberty in the tradition of the Austrian School."

Nevada State Bank took over Silver State's branches and deposits in Nevada, while National Bank of Arizona, another Zions Bancorporation subsidiary, took over four Silver State branches in Arizona.

The transaction cost the Deposit Insurance Fund between $450 million and $550 million, the FDIC said.

Silver State had loans and assets of $1.887 billion when the FDIC seized the struggling financial institution.

When French left the bank, Silver State publicly said it was for "personal reasons." However, subsequently, French testified that he was "asked to leave" the bank, the complaint said.

The FDIC said French "violated various federal laws and regulations" involving certain loans that went into delinquency, costing the bank about $10 million.

The federal agency said French had been paid $98,000 in loan fee commissions involving failed loans, several of which involved the bank's largest borrower, real estate developer Thomas Jurbala.

In the report, the FDIC claimed that with some loans to Jurbala or his companies, French used inflated appraisals and approved questionable loan disbursements.

"These practices masked ... failure to complete various projects as agreed, as well as his ability to service his debt, and enabled Jurbala to obtain additional funds from the bank both to service past due loans and for new projects," the complaint said.

In his statement, French said he looked forward to the opportunity to confront these baseless allegations and fully expected to be vindicated." If he does contest these allegations, a public hearing would be held, possibly in Las Vegas, according to the FDIC.

Contact reporter Chris Sieroty at csieroty@reviewjournal.
com or 702-477-3893.