Misrepresentation Claimed : New Owner of Sunwest Sues Former Directors

Sunwest Bank and its new owner sued the bank’s former directors Tuesday, claiming that they negligently operated the Tustin-based bank and misrepresented its condition before selling it last year for $10.75 million.

The bank and its parent, Centennial Beneficial Corp. of Orange, did not specify the amount of general and punitive damages being sought from the former directors and the accounting firm of Ernst & Whinney. But the suit, filed in Orange County Superior Court, says damages exceed $5 million.

Centennial has infused $3 million to $4 million into the bank to bolster it and to meet regulatory guidelines, according to Steven M. Goldberg, the Los Angeles lawyer for the plaintiffs.

Sunwest and Centennial launched what is essentially a two-pronged attack against former chairman and president John J. Harney and four directors who owned controlling interest in the bank.

Sunwest claims in the suit that the former directors failed to stop employees from approving loans that exceeded regulatory limits, from approving loans to borrowers who had not made payments on previous loans and from inflating the value of collateral.

For its part, Centennial claims that the directors, before selling the bank in June, 1985, misrepresented the bank’s condition by falsely stating that it was profitable, that certain loans did not have to be charged off as uncollectible, and that information on loans and assets given to Centennial was accurate.

The two plaintiffs also claimed that Ernst & Whinney was negligent in its audit and report on the bank’s financial condition.

Harney and the other defendants--Robert N. Wakeman, John R. Betson Jr., Robert M. Oster and Jerome A. Stewart--could not be reached for comment.