Tuesday, October 04, 2011
It's not just the big boys.....
From Spokesman-Review: A bank failure has revealed a truly astonishing and obnoxious set of criminal practices among small-town banks.
It's all about share price. Profit is irrelevant, responsibility is irrelevant, legality is irrelevant, customers are irrelevant, employees are irrelevant.
Share price rules all. ¶ 3:16 AM
The Bank of Whitman’s failure has left other regional lenders stuck with piles of insider loans that could lead to millions in losses.
Recent court filings and public records disclose that RiverBank, of Spokane, for example, loaned large sums of money to employees of Bank of Whitman for stock purchases in the Colfax-based institution that federal and state regulators closed in early August. Many of those loans, which critics say were pre-arranged between the lending institutions, are now in default.
A top state regulator considers such practices fairly common among some lenders, but a lawyer defending the Bank of Whitman employees against collection efforts calls the loan program a failed “scheme” that was designed to add shine to bank balance sheets and asset portfolios.
Some Bank of Whitman employees were required as a condition of their employment to borrow money to buy shares of their own bank, said Spokane attorney Bob Dunn.
“We’re talking about employment blackmail here,” he said.
A Bank of Whitman manager, Kyle York, said he was ordered by top bank executives, including former CEO James Tribbett, in December 2006 to buy 3,500 shares of the holding company’s stock at a price of $101 per share.
To fund the purchase, York was presented blank loan documents from RiverBank to borrow $353,843.
To repay the loan, York would be awarded sufficient bonuses and dividends to make the payments.
As Whitman’s financial condition eroded and its stock was rendered worthless, the bank stopped making the agreed-upon bonus payments to York. Those actions left York on the hook to repay a loan on a worthless asset.
It's all about share price. Profit is irrelevant, responsibility is irrelevant, legality is irrelevant, customers are irrelevant, employees are irrelevant.
Share price rules all. ¶ 3:16 AM
