Failed US Private Bank Probed For "Questionable Activities" - Report

Tom Burroughes

30 March 2012

After investors sued the former top executives of Lydian Private Bank over claims that inaccurate financial statements misled them during a capital raising, a federal report revealed that government agencies are investigating “questionable activities” of the failed bank, according to the South Florida Business Journal.

The Palm Beach-based bank failed in August, at an estimated cost to the FDIC of $292.1 million, and its assets were assumed by Miami-based Sabadell United Bank.

According to a March 21 report by the US Department of the Treasury’s Office of Inspector General, the bank was hammered by its over-concentration in high-risk mortgages, such as loans with no documented income and negative amortization, and a “dominant” chief executive with inadequate oversight from the board of directors, the publication said.

Lydian chairman Rory Brown was also CEO up until the months before the bank failed. Attorney Gregory William Coleman, who represented Brown and Lydian in recent litigation, did not return a call seeking comment, the publication said.

The OIG report stated that it did not address all the problems with Lydian because there are multiple investigations by various government agencies concerning what it called “questionable activities.” The OIG referred other unidentified matters to the Treasury Department’s Office of Investigations, which determines whether or not financial laws were broken, the publication added.