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Robert Trigaux

Why Orion Bank CEO Jerry Williams, banker of the year, was ousted before his bank failed




Wake up and good morning. A Florida bank failure is not unusual these days but it is odd to have the Federal Reserve demand the ouster of a Florida bank CEO so soon before the bank fails and is sold to an out-of-state institution.

Especially when that bank CEO was chairman of the Florida Bankers Association for the 2005-06 year. And the American Banker daily trade newspaper named him "Community Banker of the Year" in 2006.

Meet Jerry Williams (photo, left), ex-CEO of Orion Bank in Naples, Fla., which was seized Friday by federal regulators and sold to a Louisiana bank called IberiaBank. But not before Williams got the heave-ho. The Federal Deposit Insurance Corp. said the cost of Orion to its insurance fund will be $615 million. Here's the complete FDIC release on Orion, Florida's 11th bank failure of 2009.

But it is the Federal Reserve's formal order on Nov. 9 demanding Williams be fired that is so intriguing. According to the Fed, Williams made false statements to regulators and tried to artificially prop up the bank’s finances. Under Williams’ supervision, the bank loaned $60 million to straw borrowers -- borrowers who front for the true borrower who already had hit his loan limit, according to the directive. The money was supposed to buy troubled assets from the bank, which would make Orion appear in better shape that it was.

But wait. There's more. According to the Fed's "corrective" action, a portion of the extra loan funneled to Orion's maxed-out borrower was used, in turn, to buy stock in Orion, thus making the banking company appear freshly capitalized. Says the Fed:

"The bank needed additional capital as of June 30, 2009, to avoid being less than well-capitalized. Williams had knowledge that $15 million of loan proceeds from the June 2009 loans referred to above were to be used to purchase common and preferred stock issued by Orion Bancorp, Inc., Naples, Florida (“Bancorp”), the parent holding company for the bank, and Williams took steps to ensure that the $15 million was promptly used to purchase the holding company stock."

The Federal Reserve does not identify Orion's mystery borrower. But a Sarasota Herald-Tribune story may shed some light. In a regulatory filing in October, Orion objected to being forced by examiners to state as valueless loans made to Francesco Mileto. Those write-offs "could destroy the bank," Orion wrote, and asked for another regulatory review of those loans, the newspaper reported. Mileto, the Herald-Tribune says, owns a company in Fort Lauderdale called Centurion Partners, which has the same address -- 110 E. Broward Blvd., Suite 1700 -- as five other companies that are mentioned in Orion loan documents filed in late June. Those five companies -- Metro Jed LLC, Metro Minanis LLC, Metro City Storage, Metro MM LLC and Metro Interdan LLC -- collectively owe Orion $22.3 million.

Davidjoneseconomistflagulfcoastuniveristy Is this the mysterious borrower who brought down CEO Williams? Maybe, but it's not definitive. Another story in the Fort Myers News-Press does capture the growing weariness of the public in both the number of bank failures and the underlying self-dealing that is so common in these bailouts.

The News-Press quotes a very astute David Jones (in photo) -- I knew him long ago in Washington as a former Federal Reserve economist and I am delighted to see him down here now in Florida as a professor at Florida Gulf Coast University in Fort Myers. States Jones:

“It fans the flames of the public’s disdain for the entire financial system.”

We'll know more soon about Williams' plight, but let's leave this blog posting with a statement from Williams himself, which endured on Orion's Web site even after the feds grabbed the bank Friday. This is Williams when he still served as CEO, and Orion's biggest shareholder:

"I want to thank you for considering Orion Bank, and welcome you to a very different way of banking. It’s good to know that in today’s economic climate, some banks are still standing strong. And thanks to our unique approach and business model, Orion is - and will remain - one of them. Regardless of the times, Orion will continue to be solid and secure.

"Now in its 32nd year, Orion is one of the largest privately held community banks in the United States. How have we done it? Being a privately held bank allows us to plan for the long term. That means Orion can pursue policies that reduce exposure and maximize success, coupled with the capacity and strength to continue moving forward despite the increasingly dynamic nature of banking today.

"No, Orion isn't like other banks. And our history of solid performance based on our commitment to go above and beyond for every customer is ample proof."

Well, lots of self-congratulatory language here. It's a reminder that CEO talk can sound great but still be a thousand miles from reality.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:26am]


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