A group of creditors of the failed First NBC Bank have filed a lawsuit against its former top executives and its auditors in the latest legal maneuver since the $1 billion collapse of the New Orleans-based bank two years ago.
The suit, filed Friday in U.S. District Court in New Orleans, names First NBC's former CEO Ashton Ryan, Chief Financial Officer Mary Beth Verdigets, Chief Credit Officer William Burnell and lead attorney Gregory St. Angelo.
It also names the bank's audit firm, Ernst & Young, and Mark Bell, the firm's San Antonio-based partner who signed off on the bank's accounts for the period leading up to its collapse.
The lawsuit was filed on behalf of a group of creditors, ranging from individuals to hedge funds, who are owed just under $70 million in an outstanding unsecured loan made to First NBC.
They were given permission to file their suit by the bankruptcy court with the aim primarily of claiming some money that may be available from insurance policies taken out by the bank in 2015 and 2016, according to Lawrence Blake Jones, a former independent director of the holding company that owned First NBC Bank and the chief restructuring officer overseeing its bankruptcy.
The policies were for $60 million in each year. But because the insurance companies have the right to deduct their own legal expenses and will vigorously contest the extent of their liability, the potential pot will be far less than the combined $120 million, Jones said.
Of the former bank officers being sued, St. Angelo is the only one so far to have been criminally charged, though the case brought by federal prosecutors in March made clear that Ryan and Burnell also are targets of the investigation.
St. Angelo, who is out on $1 million bail, is due back in federal court at the end of this month and has filed documents indicating he will change his plea from "not guilty" to "guilty." His lawyers have said that he is cooperating with prosecutors in the case.
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The creditors' lawsuit draws on language in the charging documents filed in March against St. Angelo, which outlined a series of schemes and alleged that St. Angelo, Ryan and Burnell conspired to defraud the bank through various "false and fraudulent pretenses," including lending money to St. Angelo and front companies he controlled while concealing his true financial state and the value of historic tax credits and other assets claimed to back the loans.
The lawsuit alleges a "breach of fiduciary duty" by the named officers for failing to properly assess the bank's risks, as well as conspiracy to commit fraud.
The plaintiffs are represented by Eric O'Bell, a Metairie attorney; Leo Congeni, a New Orleans bankruptcy lawyer; and Glancy, Prongay & Murray, a Los Angeles-based shareholder activist law firm.
The filing was timed to get in ahead of the May 11 bankruptcy court deadline of two years from the date the bank filed for bankruptcy.
First NBC Bank's former top lawyer was charged in federal court Friday with conspiracy to defraud the New Orleans bank, which failed two years…
"We intend to vigorously prosecute the claims arising from direct harm to the holding company (of the bank), including causing it to continue making millions of dollars of capital investments in the bank at times when it was poorly controlled and faced exceptional risk," said O'Bell.
The former officers weren't immediately available, and their attorneys didn't respond to requests for comment. Attorneys for Ryan and Burnell have previously maintained their clients' innocence of any wrongdoing.
An Ernst & Young spokesperson, Suzanne Bouhia, emailed a statement which read: "EY’s audits of First NBC’s financial statements complied with professional standards, and any claims to the contrary are without merit. We strongly dispute these claims and will vigorously defend EY, Mr. Bell and all of EY’s professionals in this case."