Former leaders of Orlando's first bank to fail during the U.S. financial crisis have agreed to a set of multimillion-dollar deals to settle allegations they caused the bank's demise, regulators and lawyers confirmed this week.
Old Southern Bank founder John G. Squires and seven former directors - including his daughter, Orlando lawyer Grey Squires Binford – agreed to settle the claims made by the Federal Deposit Insurance Corp. and nearly two dozen local investors in Old Southern, according to documents obtained by the Sentinel.
They denied any wrongdoing and agreed to the deals to avoid the expense of further litigation, the FDIC said. Squires and his group have blamed the failure on the real estate meltdown and Great Recession of 2007 to 2009.
"We deny there was any liability whatsoever," said Charlie Stutts, a Tampa lawyer for Squires and others in the FDIC action. "And we view the terms of this settlement as very favorable, given the millions and millions of dollars in claims that were out there."
Terms of the separate agreements directed $3.35 million to the FDIC and $2 million to the investors, records show. The FDIC did not disclose how much bank officials paid out-of-pocket and how much was covered by their professional liability insurance policy. All of the investors' settlement was paid by the insurer, officials said.
The FDIC's insurance fund recorded nearly $100 million in losses and investors lost more than $50 million when Old Southern fell in March 2010 under the weight of problem real-estate loans, capital loss and FDIC scrutiny.
Since 2008, the FDIC has reached nearly 50 professional liability settlements with officials of failed Florida banks – more than any other state, according to agency data. Old Southern is the only Central Florida bank that appears on the settlement list.
Though they received a small fraction of their losses, bank investors said they were glad to recover anything. They sued Squires and certain board members in August 2010, accusing them of hiding the bank's financial woes while raising millions of dollars in financing from investors.
Barry Render, a retired Rollins College business professor, said a $15,000 settlement check arrived in his mailbox earlier this year.
"I knew there had been negotiations going on for a while and there was a chance we'd at least get something," said Render, who was among more than 250 investors in Old Southern. "I was glad to get $15,000, though it's not much compared to losing $200,000."
"We are extremely pleased with the outcome of the case," said Tucker Byrd, an Orlando lawyer who represented the investors. "It took a while, but we feel the process worked for these investors."
Old Southern investors defied the odds by recouping even pennies on the dollar, experts said. There is usually nothing left over, they say, after customers' deposits are covered and creditors' claims are processed.
"It's rare for shareholders to get anything from a failed bank," said former federal bank regulator James Gilkeson, a finance professor at the University of Central Florida. "So there was likely strong evidence of misconduct, not just a matter of being in the wrong lending business during the wrong kind of economy."
Stutts insisted bank officials did nothing wrong.
"The FDIC never filed suit," he said. "They issued demand letters that made very vague allegations against these folks, but never cited any specific acts of negligence or wrongdoing. It was very much routine, boilerplate language that the FDIC has used in every case like this I have handled."
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