John Liljeberg Jr. and his brother, Robert, spent decades trying to build a nursing home in Kenner, near the Ochsner Medical Center there. Work began in the early 1980s, but long periods passed while the property sat idle.
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By 2007, the Liljebergs had changed their plans. Acting in part on the advice of New Orleans' best-known banker, Ashton Ryan Jr., they decided instead to develop a 100,000-square-foot healthcare facility, called St. Theresa Specialty Hospital, a 42-bed, long-term acute-care hospital and rehabilitation facility.
One factor that helped jump-start the long-stalled effort, according to a lawyer involved in the case, was that the Liljebergs found a willing lender in First NBC Bank.
The community bank was founded by Ryan in 2006 and expanded rapidly, developing a reputation for making loans that many larger banks in the area were not willing to take on.
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But a decade later, First NBC Bank and St. Theresa are both closed, and in the aftermath of First NBC’s collapse, the Liljebergs’ borrowing is the focus of separate civil lawsuits in which they are both suing and being sued. One of the suits accuses Ryan of fraud.
The Liljebergs borrowed almost $40 million in a nine-year span, much of which, they now allege in court documents, was done without their approval and at Ryan's behest. They say the First NBC president and CEO issued them new loans so that they'd be able to make payments on older ones as they came due. His goal, they claim, was to “fraudulently improve” the bank’s finances.
“Ashton Ryan was at times acting outside the scope of his role at First NBC Bank, and took actions which were outside the practices and policies of First NBC Bank for his own self-benefit and enrichment,” the Liljebergs' lawsuit states.
Ryan, who has not been charged with a crime, has denied wrongdoing. His attorney, Eddie Castaing, declined comment on the matter Friday.
Still, the allegations made by the Liljebergs have caught the attention of federal investigators, who continue to probe First NBC’s collapse. Castaing recently asked a judge to stall the Liljebergs' suit while the federal probe plays out.
Meanwhile, the first criminal charge tied to the federal grand jury inquiry was filed last week against a Slidell contractor, who is charged with one felony count of conspiracy to commit bank fraud.
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Prosecutors allege that Jeffrey Dunlap, 44, worked with Ryan to file phony or misleading financial documents with First NBC to support ill-advised loans that Ryan approved. At the same time, they allege, Ryan, in a separate business venture unrelated to First NBC, ran up a multimillion-dollar debt to Dunlap's firm.
The charges are part of a broader probe into the bank's collapse, in which federal prosecutors are evaluating whether Ryan or other bank officials were negligent, failed in their fiduciary duty to oversee the business or benefited personally from a business relationship, like extending a line of credit.
In Dunlap's case, prosecutors allege that his firm, Phoenix Civil Contractors, secured a $22 million line of credit from First NBC based on "false financial statements and inflated accounts receivable” that were filed at Ryan’s urging.
Ryan has denied wrongdoing in both matters.
But the allegations by St. Theresa Hospital against Ryan follow others, outlined in court filings and regulatory reviews, that Ryan regularly renewed loans to cash-strapped clients even as their long-term prospects were questionable, in some cases issuing loans without the proper paperwork or adequate collateral.
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While the cases are similar, what's unique, so far, about the loans to Dunlap may be Ryan's alleged personal ties to his business.
Some experts have speculated as to whether Ryan's relationship with Phoenix ran afoul of federal banking regulations that govern insider loans, which include transactions involving bank officers, directors or entities to which they are linked.
In the wake of First NBC's failure in 2017, the Liljebergs are among a number of borrowers who have turned to the courts to seek relief from their debts. Like others, they contend that, at Ryan's urging, they borrowed more than they could handle, and that First NBC's loan underwriting and risk selection were substandard. Also like others, their debt load mushroomed as Ryan extended them loan after loan.
For St. Theresa, an arrangement that began with a $1.5 million loan in 2010 grew into a nearly $33 million debt, court records show. In fact, First NBC kept the money flowing, amending the original loan terms multiple times and issuing loans that the Liljebergs contend often came on Ryan’s own volition — without their knowledge — to repay the earlier loans that were coming due.
Ryan issued new loans “even though he was aware that the operation was in danger of defaulting,” the lawsuit alleges.
St. Theresa’s lawsuit contends that Ryan’s relationship with the Liljebergs went “past a normal arm’s length,” and that he “stepped into an advisory role in his relationship,” which constituted a breach of his fiduciary duty.
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St. Theresa closed in January, a step that Craig Mordock, a lawyer representing the hospital, described as tied to the bank’s collapse.
Mordock said Ryan “continued to make loans even though it was not in the Liljebergs’ best interests. ... He marked loans as performing when they clearly were not, and this was done to the detriment of St. Theresa Hospital.”
In the lawsuit, filed in Orleans Parish Civil District Court in February, St. Theresa alleged that Ryan disguised the hospital’s true financial picture, and enabled the borrowing to balloon far beyond the Liljebergs' roughly $23 million of collateral.
In some cases, Ryan sidestepped bank safeguards in order to advance more money, according to the lawsuit, which describes a tactic in which he would force the hospital’s checking account to overdraft. That allowed Ryan to put additional money into it without having to first get approval from the bank’s loan committee.
John Liljeberg Jr., a pharmacist and entrepreneur, died in 2013. His wife, Rose Lynne Liljeberg, and Robert Liljeberg Sr. are listed in the various lawsuits.
After it closed, nearly $1 billion of First NBC’s loans were auctioned off by the Federal Deposit Insurance Corp., the U.S. banking regulator. The Liljebergs’ debt was among scores of loans that were ultimately sold for a fraction of their face value.
Right up until it collapsed this spring, First NBC Bank made a business out of issuing risky loans.
The buyer, Denver-based private equity firm Summit Investment Management, was active in the First NBC auction. Last month, the firm sued St. Theresa, saying that it had defaulted on its loans. It was one of a number of lawsuits that Summit has filed across the metro area in recent months as it works to turn a profit on its investment.
Summit’s lawsuit against St. Theresa Specialty Hospital LLC, filed in Civil District Court, contends that the hospital defaulted on nearly $32.7 million.
Meanwhile, the lawsuit filed by the Liljebergs continues to move through the courts. Last week, the FDIC filed a motion to move the case to federal court. The case lists Ryan and First NBC Bank as defendants, as well as Summit and the FDIC.
Earlier this month, Ryan’s attorney asked the judge to put the case on hold until the grand jury finishes its investigation, saying Ryan faced “a real risk” of self-incrimination if both cases proceed simultaneously.
“The grand jury investigation is examining banking activities that are inextricably intertwined with the claims of plaintiffs herein, as well as defendant’s defenses to such claims,” Castaing’s motion stated.
The request, though common in cases where civil and criminal matters overlap, may signal that charges around the St. Theresa loans could be coming.
Mordock, the Liljebergs' lawyer, said Friday that he had not received a grand jury subpoena for documents related to the accusations.
Dunlap, the Slidell contractor charged last week, sued Ryan in November, alleging that Ryan had stiffed him on a debt of nearly $5.5 million and instead set up a loan and credit line for Phoenix at First NBC. Castaing also sought a stay in that case, citing the grand jury proceeding.
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If convicted, Dunlap could face up to 30 years in jail and a fine of more than $1 million. However, he was charged in a bill of information, which is typically a signal that a defendant is cooperating with the government in exchange for leniency.
Though he pleaded not guilty last week, his lawyer said he "accepts his responsibility" and is expected to plead guilty. He was released on $25,000 bail by U.S. Magistrate Judge Joseph Wilkinson Jr.