First NBC Bank’s stunning $1 billion collapse likely ended dozens of banking careers, some by choice and some by circumstance.
Gregory St. Angelo’s circumstances are unique.
St. Angelo, the former longtime attorney for First NBC, has been cited by a federal agency for having engaged in “unsafe or unsound banking practice” and essentially banned for life from the banking industry.
According to a four-page prohibition order issued by the Federal Deposit Insurance Corp., St. Angelo demonstrated “willful disregard for the safety or soundness of the bank,” which failed in April 2017.
The FDIC also determined that St. Angelo benefited from $150,000 in “unearned attorney’s fees” from First NBC in 2016.
But that amount pales in comparison to how much money St. Angelo borrowed from the bank: more than $49 million, court records show, a staggering loan burden that went into default when First NBC was declared insolvent.
St. Angelo waived his rights to a hearing on the allegations and instead entered into a consent agreement with the FDIC in April, in which he neither admitted nor denied wrongdoing.
Neither St. Angelo nor his attorney, Phil Wittmann, returned a message from The Advocate seeking comment.
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The Oct. 26 order, issued nearly 18 months after the FDIC began combing through First NBC’s collapse, prohibits St. Angelo from “participating in any manner in the conduct of the affairs of any financial institution or agency” without prior regulatory approval.
Such actions are uncommon, experts say, because bank directors and officers are generally given broad latitude to use their best business judgment. If they can plausibly argue they were acting in good faith on an informed basis, their exposure is limited.
In the past 12 months, the FDIC has issued just 46 prohibition orders across the entire country, including the one against St. Angelo, agency records show.
“If it’s just garden-variety bad business judgment, you’re not going to end up on the receiving end of an enforcement action,” said Francis Grady, a former FDIC lawyer. “But if you have personally reprehensible behavior, you’re going to end up on the end of an enforcement action.”
It’s also unusual to see an order issued against a bank’s general counsel, rather than an officer or director, according to Grady.
“I can’t say that I’ve read too many of these in my years as a banking attorney,” he said, adding, “It doesn’t look too good.”
Since First NBC failed, St. Angelo has been the subject of a raft of civil lawsuits. He is also one of the targets of a federal grand jury investigation into the collapse, the costliest bank failure in the U.S. since the height of the 2008-10 financial crisis.
Prosecutors are evaluating whether bank founder and CEO Ashton Ryan Jr. or other bank officials had such an appetite for risk that it amounted to negligence, as well as whether any bank officials benefited personally from First NBC's extension of loans and lines of credits.
In June, St. Angelo reached a deal to repay roughly $30 million to a firm that bought his overdue loans — which totaled more than $49 million — at an auction.
Ironically, St. Angelo’s main role at First NBC was to chase after borrowers who fell behind. He previously held the same role at First Bank and Trust, owned by New Orleans developer Joseph Canizaro.
That’s where St. Angelo got to know Ryan, a prominent New Orleans banker who worked at First Bank and Trust until just before Hurricane Katrina upended the city in 2005.
"He's an expert in that whole area. And we used him for loan collection activities substantially," Ryan said in a 2014 civil deposition.
Ryan did not return a message seeking comment.
Last year, the FDIC’s inspector general reported that First NBC frequently issued or renewed loans to distressed clients, even after their long-term prospects were exposed as questionable at best. In many cases, loans were issued without the necessary paperwork or adequate collateral.
The report focused much of its criticism on Ryan, but it also criticized a lack of oversight by the bank’s board and by federal and state regulators.
Across the U.S., bank failures have slowed significantly since the height of the financial crisis in 2010, when regulators closed 157 banks, the highest number since the savings-and-loan crisis ended in 1992. Just eight banks failed in 2017, including First NBC.
In some cases, the FDIC pursues litigation against bank officers and directors to recoup damages, typically alleging that they were negligent or failed in their fiduciary duty.
The FDIC's decision on whether to pursue such a lawsuit typically comes after an investigation that can take as long as 18 months, experts say.
Such litigation is aimed at recouping proceeds from insurance policies that are taken out to protect bank directors and officers from personal liability, experts say. The FDIC has a three-year window to file suits for tort claims and six years for breach-of-contract claims.