Several law firms in Florida became the center of an intense attorney generals investigation after the financial crisis for their handling of foreclosures.
Now the Federal Deposit Insurance Corp. is bringing a different type of case to the table, filing a complaint against the Florida law firm of Nason, Yeager, Gerson, White & Lioce for allegedly failing to intervene with Orion Bank’s extension of loans in an amount that defied safe lending standards imposed on the bank by its own loan committee.
FDIC is suing as the receiver of Naples, Fla.-based Orion. The bank failed after internal officers allegedly extended $82 million of new loans and credit to entities owned by one borrower even though the bank was already over-leveraged and facing capitalization issues, court records say.
At the time of the extension, the borrower taking out the funds already owed $43 billion to Orion Bank from past transactions, the complaint alleges.
Court records say Orion retained the Nason Yeager law firm to represent the bank in the extension of the $82 million in loans.
The FDIC is suing the legal services provider for damages, saying there were ‘obvious red flags’ that should have warned the law firm not to disburse millions in funds to the borrower.
The FDIC says the law firm never attempted “to prevent, report, or even question the bank’s officers’ suspicious and illegal conduct.”
The regulator is attempting to recover $31 million in losses incurred by Orion as a result of the law firm not warning the bank about the bank officer’s improper conduct in handling lending activity.
The suit filed by the FDIC also names two of Nason Yeager’s attorneys as defendants.
The FDIC specifically filed two malpractice-related claims for breach of fiduciary duty and professional negligence.
An attorney representing the firm and two attorneys said, “My clients strongly deny all allegations of wrongdoing asserted by the FDIC because of pending litigation we cannot comment further.”