Failed Bank in GA accused of Fraud

The largest and oldest Bank in Habersham County, Georgia has been accused making dicey and often questionable business decisions before the bank ultimately failed in January according to a lawsuit.

Community Bank and Trust the bank in question responded through its lawyers in a statement which read as follows: Officials did not commit any fraudulent acts or promise the Cleveland Car Dealership a loan of eleven million dollars that was never approved.

Community Bank and Trust on January 29th was seized by regulators. The Cornelia based bank had assets of one billion one million dollars and was doing business in thirty six locations in which seven were located in Hall County. The bank’s assets have been purchased by South Carolina Bank and Trust.

Rumors of criminal activity have been spreading ever since the bank’s take over. A former officer of the bank told the Northeast Georgian Newspaper that some individuals were going to jail.

A lawsuit filed by Mitch Simpson has offered the first glimpse into the activities of the bank although no criminal charges have been filed against any officer’s of the bank.

Mr. Simpson in his lawsuit stated that Community Bank and Trust was aware of this company, Cleveland Motor Cars, financial situation. He charges that the bank during 2008 continued to honor checks written from Cleveland Motor Cars even when the account was overdrawn. The account was several hundred thousand dollars overdrawn according to Simpson.

Cleveland Motor Cars took out several loans with Community Bank and Trust with a combined total of six million five hundred thousand dollars. Cleveland Motor Cars when unable to obtain more loans paid seven individuals to take out loans with the bank of approximately one hundred twenty five thousand dollars each between February and April of 2009. Cleveland Motor Cars paid each individual two thousand five hundred dollars to sign the loans. The lawsuit contends that some of the individuals were not credit worthy and that Community Bank and Trust was aware that the individuals involved were being paid to obtain the loans. The bank made the loans anyway.

Simpson in his lawsuit stated that Community Bank and Trust agreed to make an eleven million dollar loan to roll up the existing seven loans into one large loan to Cleveland Motor Cars. The bank never approved the loan. A creditor presented a draft to the Cleveland Motor Cars account for four hundred twenty three thousand dollars the bank refused it. Simpson alleges that Cleveland Motor Cars relied on the banks false representations. The lawsuit states that Cleveland Motor Cars chose to stay in business and continue to lose money they would not have lost if Community Bank and Trust had lived up to their word and lent them the eleven million.

Lawyers for Community Bank and Trust on January 29th filed a response denying the allegations and counterclaimed Cleveland Motor Cars for six million five hundred thousand dollars in loan principal and three hundred forty one thousand dollars in interest. The banks response to Mr. Simpsons alleges was that the Community Bank and Trust did not make any promises nor did it engage in any conduct that fraudulently induced Cleveland Motor Cars to act in reliance on the promises or conduct of the bank.

Mr. Simpson’s lawsuit was original filed in Habersham County in Georgia however with the bank’s failure in January the lawsuit has been moved to the United States District Court for the Northern District of Georgia. The moved is due to the Federal Deposit Insurance Corporation obtaining receivership thus making them the defendant in the case.

The case will be heard by Judge Richard Story.