The Federal Deposit Insurance Corp. filed a $7.4 million lawsuit against four former executives at Bradford Bank, alleging negligence on the executives' part caused losses that contributed to the Towson bank's failure in 2009.
The lawsuit, filed Feb. 28 in U.S. District Court, names the bank's former president, Dallas R. Arthur; executive vice president for commercial lending, Mary Beth Taylor; and two former directors who served on the bank's loan committee, Gilbert D. Marsiglia and John O. Mitchell III, as defendants.
The FDIC claims that the four were negligent "in recommending and/or approving" commercial real estate, land-acquisition, development and construction loans that violated "prudent, safe and sound lending practices."
The lawsuit alleged the executives violated the bank's own loan policy; financed "speculative" ventures in which the borrowers invested little money; and gave credit to borrowers who they knew weren't creditworthy or were financially unstable.
Arthur, Taylor, Marsiglia and Mitchell could not be reached for comment Wednesday. FDIC spokesman David Barr said the agency does not comment on pending litigation.
The lawsuit cited problems with seven loans approved by all or most of the executives between August 2006 and October 2007 for more than $23.7 million. The FDIC estimated the loans caused damages of more than $7.43 million to the bank's operating capital, profits and investment opportunities, which it seeks to recover.
The FDIC took over Bradford Bank in August 2009, agreeing to sell Bradford's nine branches and most of its $452 million in assets and $383 million in deposits to M&T Bank.