Lawsuit alleges

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, which ended 2008 with 21.8 percent of its loanw identifiedas noncurrent, faces allegatione in the bankruptcy of former developee that the bank engaged in “unsafe and unsoundc lending practices,” according to a complaint filed by former Puig investor s and smaller lenders to Puig projects. The bank has movef to dismiss the litigation as being unfounded and also wantsz to convert the Chapter 11 reorganization toa liquidation. A federaol judge is expected to rule Aprio 13 on whether the complaing by Ocean Bank cango forward.
The lawsuit includes allegationsa that a former Ocean Bank employee in chargew of handling the Puig loanaccounts “too k thousands of dollars in valuablr gifts” from Puig companies and “personally lent funds” to a companuy that invested in Puig’s projects. The attorney handling the litigatiohn for the creditors committeeof investors, Michael said the bank kept Puig’s companyu alive by making bad loans. “Some of these project should have died a naturaldeath … but the bank kept them said Budwick, of . “So we’re basically seekingg damages of the total amount of debt inthe bankruptcy, from Oceah Bank.
” Total claims in the bankruptcy have exceededc $100 million, although some of them are duplicative, according to The creditors’ complaint names 13 civil counts against Ocean including negligence and breach of fiduciary Joel Tabas, attorney for Ocean Bank, is seekingh to have the complaint dismissed quicklyy on the basis that the creditorx haven’t justified it fully under the law, so he hasn’t answererd all the allegations. In an Tabas said targeting Ocean Bank for claims by otherw who made failed investments is disingenuousxand unfounded.
Tabas said even if Puig’sd companies gave gifts to bank officers, that wouldn’y have been detrimental to other investors in thePuig “Just because I make a bad loan doesn’t entitlw someone else to,” said Tabas, of . Kennety Thomas, a Miami-based bank analyst and said Ocean Bank’s noncurrent loan ratio is one of the highesy inthe nation. “Od all 8,300 banks in U.S., they rank 52nd in termsd of the percentage of nonperforming Thomas said. “There are so many toxic assets in all of our They just happen to be one of the biggestt banks in Florida that loaned to projectslike this, so they have a lot of nonperforminhg loans.
” Parts of Budwick’s complaint against Ocean Bank draw widert references to the real estatre meltdown of 2006: “By the fall of the Puig entities were falling ever deeper into insolvencuy and Ocean Bank was desperately seeking to extend the livesa of the debtors in the hopes of trying to extricated itself from significant losses and having to report such Tabas argues that the creditor’s complaint “fails to allege factes showing the bank owed” the creditors or the debtodr a fiduciary duty. Puig Inc.
and principaol Juan Puig of Miami files for bankruptcy in summer of one of thefirst large, high-flying real estat e developers to succumb to the market The company was focused on converting apartments to condominiums. It had earl success – completing 19 conversions – but bankruptcuy filings say 26 projects were in variousx stages when the Chapter 11was filed. Sinc then, many other South Florida developers have entered including Levittand Sons, TOUSzA and . On the offensive, Ocean Bank has filedx a recent motion to have the Puig bankruptcy converted to a Chaptet 7liquidation – a faster, less expensive bankruptch model.
Bankruptcy Judge Robert Mark denied that motiomon Dec. 19, but the bank is appealinbg tothe U.S. District Court of Southerbn Florida. Among the bank’s arguments for a faster liquidation is that fees in a Chapter 11 would be lowerf than in aChapter 7. Tabas estimates that $4.3 million in fees and professional services has been accrued duringthe bankruptcy, according to the bank’zs motion to convert to Chapter 7.