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United Western lawsuit challenges federal seizure of subsidiary bank
United Western Bancorp has challenged regulators' seizure of its chief subsidiary, United Western Bank, in a lawsuit filed Friday in U.S. District Court in Washington, D.C.
The Denver-based holding company insists federal regulators prematurely pulled the plug on the bank in January, saying the company had been in frequent communication with regulators about progress it was making on capital-formation efforts.
"We are trying to reverse this situation" by asking the court to remove the Federal Deposit Insurance Corp. as receiver and to return control of the bank to United Western, said Michael McCloskey, United Western's executive vice president and chief operating officer.
"We believe the government acted in an arbitrary and capricious fashion and lacked any basis in applicable law," McCloskey said.
A request for returning control to the bank is rare. The FDIC usually is the one suing banks, although some banks have challenged how much assets were sold for, such as Washington Mutual in 2009.
The Office of Thrift Supervision closed the $2.05 billion United Western Bank on Jan. 21, claiming it was "undercapitalized and in an unsafe and unsound condition to transact business."
The bank then was handed to the FDIC, which arranged a sale to First-Citizens Bank & Trust Co. of Raleigh, N.C., which reopened United Western's eight locations as First-Citizens branches.
"The OTS had solid grounds for closing United Western," the agency said in a statement. "We will vigorously defend the lawsuit."
The FDIC "does not comment on pending litigation," said its spokesman, Greg Hernandez.
United Western had been on the "problem bank" list for a year due to losses in construction, development and commercial real estate loans, the FDIC said.
Bank officials said they notified regulators about written commitments from investors for $149 million in capital and strong indications of interest in excess of $70 million.
The lawsuit seeks "equitable legal relief," McCloskey said, citing damage in the form of interruption of client relationships and dismissal of valuable employees.
McCloskey said the company is exploring options, including bankruptcy protection.
"Unscrambling the egg will be difficult at best," McCloskey said.
The lawsuit states the regulators "profoundly abused their enormous powers to protect the banking system" by seizing "an economically viable bank with over $400 million in available cash."
The "illegal seizure," the lawsuit contends, could cause a loss to the Deposit Insurance Fund of more than $312 million, a figure the lawsuit attributed to the FDIC.
United Western's closure was the first of two that have occurred in Colorado this year. FirsTier Bank of Louisville was closed Jan. 28 at an estimated cost to the fund of $242.6 million.
Nationally, regulators have shut down 20 U.S. banks so far this year. That includes two small banks in Georgia that were closed Friday evening.
www.denverpost.com/business/ci_17427251
United Western Bancorp has challenged regulators' seizure of its chief subsidiary, United Western Bank, in a lawsuit filed Friday in U.S. District Court in Washington, D.C.
The Denver-based holding company insists federal regulators prematurely pulled the plug on the bank in January, saying the company had been in frequent communication with regulators about progress it was making on capital-formation efforts.
"We are trying to reverse this situation" by asking the court to remove the Federal Deposit Insurance Corp. as receiver and to return control of the bank to United Western, said Michael McCloskey, United Western's executive vice president and chief operating officer.
"We believe the government acted in an arbitrary and capricious fashion and lacked any basis in applicable law," McCloskey said.
A request for returning control to the bank is rare. The FDIC usually is the one suing banks, although some banks have challenged how much assets were sold for, such as Washington Mutual in 2009.
The Office of Thrift Supervision closed the $2.05 billion United Western Bank on Jan. 21, claiming it was "undercapitalized and in an unsafe and unsound condition to transact business."
The bank then was handed to the FDIC, which arranged a sale to First-Citizens Bank & Trust Co. of Raleigh, N.C., which reopened United Western's eight locations as First-Citizens branches.
"The OTS had solid grounds for closing United Western," the agency said in a statement. "We will vigorously defend the lawsuit."
The FDIC "does not comment on pending litigation," said its spokesman, Greg Hernandez.
United Western had been on the "problem bank" list for a year due to losses in construction, development and commercial real estate loans, the FDIC said.
Bank officials said they notified regulators about written commitments from investors for $149 million in capital and strong indications of interest in excess of $70 million.
The lawsuit seeks "equitable legal relief," McCloskey said, citing damage in the form of interruption of client relationships and dismissal of valuable employees.
McCloskey said the company is exploring options, including bankruptcy protection.
"Unscrambling the egg will be difficult at best," McCloskey said.
The lawsuit states the regulators "profoundly abused their enormous powers to protect the banking system" by seizing "an economically viable bank with over $400 million in available cash."
The "illegal seizure," the lawsuit contends, could cause a loss to the Deposit Insurance Fund of more than $312 million, a figure the lawsuit attributed to the FDIC.
United Western's closure was the first of two that have occurred in Colorado this year. FirsTier Bank of Louisville was closed Jan. 28 at an estimated cost to the fund of $242.6 million.
Nationally, regulators have shut down 20 U.S. banks so far this year. That includes two small banks in Georgia that were closed Friday evening.
www.denverpost.com/business/ci_17427251
