Bank Director Seeks Insight From Manatt Partner Into FDIC Lawsuits
“FDIC Blues”Bank Director
April 20, 2012 – Bank Director looked to Manatt’s Harold P. Reichwald, co-chair of the firm’s Financial Services & Banking Practice, for insight into the Federal Deposit Insurance Corp.’s (FDIC’s) lawsuits against former directors of failed banks.
Bank Director reports that, through February, the FDIC has authorized suits against 427 directors and officers in connection with 49 bank and thrift failures sprouting from the economic downturn. However, only 22 suits were actually filed, naming 182 former directors or officers, with total damages sought of $1.98 billion.
Members of loan committees appear to be targets of these FDIC suits. “The theory is that being on the loan committee changes the relationship between the [loan committee members] and the institution – that they are exercising executive management responsibilities, and hence are not entitled to the protections of the business judgment rule,” said Reichwald.
That’s not fair, he added, because the regulators have encouraged directors of community banks to serve on loan committees.
Bank directors who are pursued by the FDIC “find themselves at a loss, trying to figure out what they did wrong, short of having made decisions that were based on the best information available at the time,” Reichwald said.
Read the article here.
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