For the first time since the S&L crisis, the FDIC is suing a failed bank’s former lawyers for professional malpractice.
The claims come against lawyers who formerly represented the now failed Neighborhood Community Bank in Newman, Georgia. The FDIC’s complaint (PDF) alleges that the lawyers deviated from the bank’s instructions and colluded with a borrower to falsely represent disbursement of loan proceeds. Important for those in the construction industry, each was an acquisition and development loan.
The complaint also alleges that the lawyers represented both the bank and the borrowers in various capacities at the same time, subverting the lawyers’ loyalty to the bank and violating their fiduciary duties.