(Source: Tim McGlone The Virginian-Pilot (MCT) — Southern Bank and Trust Co., which took over operations from the failed Bank of the Commonwealth, has begun going after delinquent borrowers, seeking to recoup tens of millions of dollars in inherited debt.
The bank filed suit this week against the owners of a Chesapeake hotel who defaulted on a $5.3 million loan.
The loan was approved by a bank executive under indictment in a bank fraud scheme, but there does not appear to be a link between the hotel’s defaulted loan and the criminal case.
“This is a straight collection action,” said Jonathan Hauser, a Norfolk lawyer representing Southern Bank. “There will probably be more of these coming.”
State and federal regulators shut down Norfolk-based Bank of the Commonwealth in September amid growing concern about the ability of the bank to survive. The bank had sustained more than $150 million in losses in recent years and, at the time, its top executives were under federal investigation.
Five top executives have since been charged with federal bank fraud and related charges. One former vice president has pleaded guilty and is awaiting sentencing. The rest, including the bank’s former president and chief executive, Edward J. Woodard Jr., are awaiting trial in U.S. District Court.
Under an agreement with the Federal Deposit Insurance Corp., Southern Bank purchased about $924 million of the failed bank’s assets. Under the loss-share agreement, the FDIC absorbs some of the bank’s losses.
Now, Mount Olive, N.C.-based Southern appears ready to become aggressive in collecting on those losses not covered by the FDIC. Hauser said there are many other substantial loans in default.
Praestans One, a limited liability company owned by six investors, borrowed $5.1 million from Bank of the Commonwealth in 2006 to buy the Country Inn & Suites hotel at 2122 Jolliff Road, Chesapeake, off Portsmouth Boulevard at Interstate 664. The bank later increased the loan to $5.3 million.
Each member of Praestans took on different amounts of debt, and each defaulted, according to the lawsuit.
Naresh Amin, a Virginia Beach resident and one of the defendants named in the suit, said Thursday that he is a silent partner in Praestans and was not aware of the suit.
He said the depressed economy made keeping up with the payments difficult. He added that Bank of the Commonwealth refused to modify the loan.
Norfolk lawyer John McIntyre, who is representing Praestans, declined to comment.
Documents filed in the lawsuit show that Simon Hounslow, a former Bank of the Commonwealth loan officer and vice president, signed off on the loan agreement. Hounslow is one of the five former executives charged in federal court in the unrelated criminal matter. He is awaiting trial.
According to city of Chesapeake records, the hotel and property was last assessed at just less than $2.5 million.
Southern also has a lawsuit pending in Norfolk Circuit Court against George Hranowskyj and Eric Menden, former business partners who obtained more than $40 million in loans from Bank of the Commonwealth for real estate ventures. Those loans are now in default. The trial in the civil suit is scheduled for Sept. 17.
Hranowskyj and Menden have each pleaded guilty to federal bank fraud charges related to those loans. The bank will have to compete with the government in seeking repayment. The government wants more than $40 million in forfeiture money from the defendants.
Tim McGlone, 757-446-2343, email@example.com
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