Shareholders of Failed Bank Sue Ex-Officials
Claiming fraud, misrepresentation and breach of contract, a group of shareholders of failed Capistrano National Bank has sued the bank’s former directors and officers and the Federal Deposit Insurance Corp. for $18.9 million.
The suit, filed in Orange County Superior Court Monday, pits 13 former shareholders of the insolvent Santa Ana-based bank against 37 defendants, including Capistrano Bancorp, Capistrano National Bank and the estate of deceased chairman Philip Stearns.
Capistrano’s four offices, with $41 million in deposits, were declared insolvent and closed on April 5 by the U.S Comptroller of the Currency, which said the bank had experienced substantial deterioration in the quality of its loan portfolio. “The bank didn’t go under just because of circumstances,” said Joseph Angelo, the shareholders’ attorney. “It went under because these guys didn’t follow banking regulations and rules . . . . They went beyond what’s acceptable for investments.”
The suit alleges, among other things, that Capistrano officers and directors failed to exercise adequate supervision over the bank’s officers and employees, took undue risks in its lending and borrowing activities and failed to scrutinize insider transactions.
Former Capistrano Bancorp president Joseph P. Munger could not be reached and officials at the FDIC were not available to comment on the suit.
Angelo said that some of the stockholders are also suing to cancel their outstanding loans.
“They had borrowed money from the bank and now they don’t feel they owe it,” he said. “Because the officers made the stock worth nothing as a result of their activities, they owe the stockholders.”