Heritage Bank’s Ousted Chief Sues the FDIC : Claims Agency Reneged on Immunity Agreement
Charging that federal regulators have reneged on a 1983 immunity agreement, Douglas Patty, the ousted chairman of failed Heritage Bank, has filed a $54-million damage suit against the Federal Deposit Insurance Corp.
Patty claims the FDIC--which sued him and other former officials of Anaheim-based Heritage earlier this year for negligence and breach of fiduciary duty--violated an agreement under which he left Heritage in return for a promise of no further civil action by the FDIC in connection with the bank’s then-growing financial problems.
An attorney for the FDIC, however, said the deal with Patty was arranged by the agency’s regulatory division as an enforcement action, while the FDIC bank liquidation division that filed the suit in its role as a receiver this year is “a different legal entity.”
Henry Rossbacher, an attorney representing the FDIC, declined to comment on the specific allegations of Patty’s suit, which was filed Monday in U.S. District Court in Los Angeles.
Rossbacher, however, said the FDIC’s 2-year-old agreement with Patty related to an “enforcement action” by the agency to remove Patty from the positions he held at the financially troubled bank. In the FDIC’s March 15 suit against Patty and other Heritage officers, Rossbacher said, “the FDIC is suing as the bank’s receiver (which is) a different legal entity.”
An angry Patty said he does not buy that reasoning. “I entered into an agreement with the FDIC in good faith. I agreed to step down . . .,” he said.
“If they would have been honest and up front with me and told me that if the bank was closed that they planned to sue me with a different hat on, they would have had to come with the U.S. Army to get me out of that bank. I would have never resigned,” Patty said.
Kenneth Ziskin, a Los Angeles banking attorney, said he does not believe that the FDIC’s action will have a chilling effect on bankers’ willingness to go along with regulatory orders. “I don’t think this is the type of arrangement that is often found . . . . I don’t think it will be offered again,” he said.
Patty’s attorney, Steven Stanwyck, said Patty is fighting the FDIC because he believes he had settled all his disputes with the agency when he signed the 1983 agreement.
“He resigned and in essence gave the FDIC everything they wanted without making them prove anything because he thought it would save the bank,” Stanwyck said.
“After the agreement was made up, they said, ‘Mr. Patty, this is the end of the whole ordeal . . . we hold you totally harmless,’ ” Patty said Wednesday. “Little did I know that it was their plan to close that bank all along . . . . I am going to fight them to the very end.”
Heritage was founded in 1975 by Patty, a controversial builder-turned-banker who frequently criticized other bank officials as “lazy.” He quickly earned a reputation for free-spending promotion of his bank and for flamboyant pronouncements on banking issues.
Heritage’s four offices were declared insolvent and seized by state regulators in March, 1984, after a two-year fight for survival. There were an estimated 15,000 depositors with $161 million on deposit when the closure order was issued.
