Former O.C. Banker’s Lawsuit Against Regulators Dismissed

A federal judge has thrown out a lawsuit that former banker Gerald J. Garner had filed against regulators, accusing them of illegally seizing his Anaheim bank more than three years ago.

But Garner vows to continue his battle with the comptroller of the currency, which regulates national banks. He said Tuesday that he plans to appeal once the judge issues a final order.

The dismissal came five months after Garner agreed, in a separate case filed by the comptroller, to a lifetime industry ban and a $167,000 fine for actions stemming from his operation of American Commerce National Bank.

The bank’s 1993 failure drew attention as regulators for the first time used a 1991 law allowing them to seize financially healthy banks. In addition, regulators used unusually strong language in accusing Garner and others of self-dealing and lying.

Garner, the bank’s chairman, has strongly denied any wrongdoing.

Since the failure, another federal agency has taken legal action against Garner. The Federal Deposit Insurance Corp., as receiver for the failed American Commerce National Bank, seeks more than $3.7 million in unpaid loans that Garner, his family and his companies had received from the institution while he was chairman.

In addition, an FBI investigation into possible bank fraud and embezzlement is pending. Garner, a disbarred lawyer, is also embroiled in a number of private lawsuits.

Garner asserted Tuesday that a lengthy hearing before the settlement in February showed “no wrongdoing, no criminal activity.”

In seizing the bank, the comptroller’s office had charged that it never really knew the condition of the bank because Garner lied to them, concealed records and wasted the bank’s assets. Insider abuses were so pervasive, the agency said then, that it no longer could trust Garner or his “weak, abusive and self-serving” officers and directors.

The comptroller, in its legal action, reiterated the allegations and accused Garner of using the institution as “his own personal piggy bank.” Garner and his wife, Joan, who also was a director, denied the allegations and didn’t admit any liability in settling the action.

The bank’s failure is expected to cost the nation’s deposit insurance fund $24 million.

Garner, meantime, sued the comptroller’s office and the FDIC, alleging mainly that American Commerce was seized illegally. He asserted that it was comptroller’s examiners who altered documents, removed records, distorted data, reneged on promises and misled bank directors. He accused an agency lawyer of causing examiners and others to commit perjury.

Garner also contended that the agency “discriminated against the bank’s management as a result of certain religious affiliations.” As early as 1986, two years after the bank opened its doors, federal bank examiners questioned the “ethnic balance” of the bank, saying it had “too many Jews,” he alleged.

But federal judges gradually threw out parts of Garner’s lawsuit. In mid-July, U.S. District Judge George H. King in Los Angeles dismissed the case against the comptroller. Though King hasn’t issued a final order, agency lawyers believe that Garner has waited too long to seek a review of the ruling.

Garner said the judge “found definite anti-Semitism by the examiners” but didn’t think that factor led to the closing of the bank. In addition, he said, King found that the comptroller falsified a major part of its audit of American Commerce but that the incident constituted an “internal dispute.”

He said he had copies of agency files “that authenticate that the bank was solvent and well-capitalized, that there was a personal vendetta [against Garner] and that there was falsification of data” by examiners.

Federal regulators have denied any such wrongdoing, and attorneys could not be reached to comment on Garner’s account of the judge’s remarks.

The judge also dismissed most of the case against the FDIC, allowing Garner to go to trial on claims for employee benefits and recovery of personal property.

As the bank’s receiver, the FDIC has filed five state and federal lawsuits seeking to collect on loans that Garner, his family and his companies received from American Commerce and failed to repay.

The largest single loan default is $1.25 million owed by Coast Plaza Doctors Hospital in Norwalk, according to the FDIC. Garner has been chairman of Coast Plaza since he and a group of doctors took it over in the late 1980s.

In addition, Garner, his wife and their three children have defaulted on 10 loans totaling $1.38 million. His children have defaulted on property loans totaling $308,000 and his brother, Harvey, has defaulted on five loans totaling $239,000. Another Garner-controlled company owes $600,000, the FDIC said.