NAPLES — The failure of Orion Bank in Naples last month has raised many questions.
There don’t seem to be many answers.
Borrowers have been caught up in the mess. So have investors.
On Nov. 13, the Florida Office of Financial Regulation shut down the bank and appointed the Federal Deposit Insurance Corp. (FDIC) as the receiver. On the same day, the Federal Reserve Bank released an order calling for the immediate firing of Orion’s president and CEO Jerry Williams, describing the bank as “critically undercapitalized.”
Williams is accused of loaning money illegally and lying to regulators to make the bank appear in better shape than it was.
Shareholders, including employees who were urged to buy stock in the private bank’s holding company as part of their 401k retirement plans, aren’t sure if they’ll get back what they invested.
When banks fail, shareholders often lose everything.
“In most cases, it’s unlikely for shareholders to get paid back,” said LaJuan Williams-Dickerson, an FDIC spokeswoman.
IberiaBank – a publicly traded bank based in Louisiana – took over Orion’s deposits and branches, but not its private shares.
In the case of Orion, shareholders stand to lose millions if they can’t get their investment back. There were 300 or more investors.
As the bank’s finances worsened, Orion’s parent company was out trying to raise more money from investors.
According to a filing with the U.S. Securities and Exchange Commission, Orion Bancorp planned to raise another $75 million through a private stock offering. The company sold $25 million in stock, with the first sale reported on June 24. The buyers aren’t disclosed.
Typically, shareholders are last in line to receive any payment when a bank fails.
It could be months before Orion’s investors find out if they’ll get anything. Bank assets must be sold and other creditors are lined up to get paid, said Williams-Dickerson with the FDIC.
Shareholders were invested in Orion Bancorp, not the bank. So the FDIC has told them not to file a claim with the receiver and to deal with the holding company directly.
Leonard Simons, 89, of Miami, was one of the original investors in Orion, which grew to become one of Florida’s largest community banks with 23 branches from Bradenton to Key West. He wonders if all his money will be lost.
“I haven’t heard a word,” he said.
He owned more than 8,000 shares in the holding company. Over the years, he acquired more stock when he received it instead of dividends.
“We bought stock when the bank was in organization,” Simons said, referring to himself and his wife.
He said he was never given the chance to sell his shares and he wasn’t sure if employees were buying stock from the directors or other outside investors.
“They really were secretive,” Simons said.
He has experience with bank failures. He invested in BankUnited, another Florida-based bank shut down by regulators earlier this year.
“I’m a total loser,” he said on that investment.
He said that loss will allow him to take $3,000 a year off his income tax bill. He may end up doing the same for his Orion investment. But he wonders how long he will be around to collect that benefit.
Some employees are considering filing a class-action lawsuit against Williams in hopes of getting money back. Some have virtually lost their entire nest egg.
Williams had been Orion’s largest shareholder. It’s not clear if he sold off any of his shares before he was ousted from the bank.
Regulators allege that Williams made $60 million in illegal loans to “straw buyers” who were fronting for a borrower who already had reached his allowable loan limit. They say Williams knew $15 million from those loans would be used to buy stock in Orion Bancorp, and that he lied about it to regulators.
According to regulators, the questionable loans also enabled the borrowers to buy “certain low-quality assets” from Orion.
Williams has been quiet. Phone calls to his home over the past month have gone unanswered.
Several of the bank’s directors declined to comment. Others couldn’t be reached.
The bank’s other directors were Earl Holland of Fort Myers, James Torok of Sarasota, Alan Pratt of Vero Beach and James Aultman of Marathon.
In the third quarter alone, Orion lost $75 million. The bank was hammered by bad loans.
Orion had more than $250 million in construction and commercial loans that were classified as non-performing, which means borrowers weren’t keeping up with payments.
In its order, the Federal Reserve Bank doesn’t name the borrower or the related groups involved in the loans they allege were illegal. Regulators won’t comment on the order against Williams, saying they’ll let it speak for itself.
Some borrowers are left to wonder whether it’s their loans that got caught up in the mess.
On June 29, Orion sold three loans it made to the D’Jamoos Group in Naples to limited liability companies linked to Francesco Mileto of Centurion Partners in Fort Lauderdale.
According to the Herald Tribune in Sarasota, the three loans and others sold to Mileto showed up on Orion’s third quarter call report to regulators and was posted on the FDIC.gov Web site in October. The newspaper reported that in the filing Orion objected to regulators’ demands for the bank to state the loans made to Mileto as valueless. Orion reportedly said those write-offs “could destroy the bank.”
The D’Jamoos Group’s three loans - totaling about $15 million - were sold without their knowledge.
The buyers were Metro Jed LLC and Metro Interdan LLC – companies with the same address as Centurion Partners, said Michael Greene, an attorney for the D’Jamoos Group.
The developers were trying to restructure the loans, which were for three different projects, when they were sold, Greene said.
“We have issues with Orion’s handling of the loans,” he said.
The developers knew nothing about the new owners of their loans, but it seemed that calls on the loans were coming from the same people after they were reassigned, Greene said.
“We don’t know what any deals were between Orion and the entities,” he said. “All we know is they are now the holders of the notes.”
The new owners of the loans foreclosed on the three properties in October. The developers are filing a counterclaim to fight it.
The loans are for a retail shopping center in Fort Myers and two office buildings – one in the Galleria Plaza in Naples and the other in the Colony Plaza in Bonita Springs.
The phone number for Centurion Partners in Fort Lauderdale has been disconnected. Mileto couldn’t be reached.
“This has just added additional confusion to an already confusing real estate market,” Greene said. “We are as interested in finding out what’s going on as anybody. We need to know who is our real lender and who are we dealing with.”
County records show other companies with links to Mileto acquiring loans from other Orion borrowers in June. Those borrowers include local developer Wafaa Assaad, who couldn’t be reached for comment.
Betsy D’Jamoos, president of JED of Southwest Florida, part of the D’Jamoos Group, said she knows nothing about the relationship between Orion and Mileto.
“The missing piece is what happened on the other coast there,” she said. “We don’t know either.”