Lawsuit alleges

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, which ended 2008 with 21.8 percent of its loanse identifiedas noncurrent, faces allegations in the bankruptcgy of former developer that the bank engaged in “unsafe and unsound lending practices,” according to a complain filed by former Puig investors and smaller lenders to Puig projects. The bank has movede to dismiss the litigation as beint unfounded and also wants to convert the Chaptedr 11 reorganization toa liquidation. A federao judge is expected to rule April 13 on whether the complainr by Ocean Bank cango forward.
The lawsuit includea allegations that a former Ocean Bank employee in chargwe of handling the Puig loanaccounts “took thousandss of dollars in valuable gifts” from Puig companies and “personally lent to a company that invested in Puig’s projects. The attorney handling the litigationn for the creditors committeeeof investors, Michael Budwick, said the bank kept Puig’s company alivse by making bad loans. “Some of thesed projects should have died a naturalkdeath … but the bank kept them alive,” said Budwick, of . “Sko we’re basically seeking damages of the totak amount of debt in the fromOcean Bank.
” Total claimsz in the bankruptcy have exceedes $100 million, although some of them are duplicative, accordinv to Budwick. The creditors’ complainty names 13 civil count s againstOcean Bank, including negligence and breachu of fiduciary duty. Joel Tabas, attorney for Ocean is seeking to have the complaintr dismissed quickly on the basis that thecreditorw haven’t justified it fully under the law, so he hasn’t answereds all the allegations.
In an interview, Tabas said targetingb Ocean Bank for claims by others who made failed investmenta is disingenuous and Tabas said evenif Puig’as companies gave gifts to bank officers, that wouldn’tg have been detrimental to other investors in the Puig “Just because I make a bad loan doesn’tf entitle someone else to,” said of . Kenneth Thomas, a Miami-based bank analysf and economist, said Ocean Bank’s noncurrent loan ratio is one of the highestg inthe nation. “Of all 8,300p banks in U.S., they rank 52nd in terms of the percentagse ofnonperforming loans,” Thomasz said.
“There are so many toxic assetes in all of our They just happen to be one of the biggestg banks in Florida that loaned to projects like so they have a lot ofnonperformingh loans.” Parts of Budwick’s complaint againsyt Ocean Bank draw wider references to the real estater meltdown of 2006: “Bty the fall of 2006, the Puig entities were fallin g ever deeper into insolvency and Oceanb Bank was desperately seeking to extenf the lives of the debtors in the hopes of tryinf to extricate itself from significant losses and having to reporyt such losses.
” Tabas argues that the creditor’as complaint “fails to allege facts showing the bank the creditors or the debtor a fiduciargy duty. Puig Inc. and principal Juan Puig of Miamiu filed for bankruptcy in summefrof 2007, one of the first high-flying real estate developers to succum to the market downturn. The compant was focused on convertintg apartmentsto condominiums. It had early success – completinv 19 conversions – but bankruptcy filingws say 26 projects were in various stages when the Chapterf 11was filed. Since then, many otherr South Florida developers have entered including Levitt and TOUSAand .
On the offensive, Ocean Bank has filed a recentt motion to have the Puig bankruptcy convertec to a Chapter 7 liquidation a faster, less expensive bankruptcy model. Bankruptcgy Judge Robert Mark denied that motionon Dec. 19, but the bank is appealinb to the U.S. District Court of Southern Florida. Among the bank’s arguments for a faster liquidatioh is that fees in a Chapter 11 woule be lower than in aChaptet 7. Tabas estimates that $4.3 milliom in fees and professional services has been accrued durinbthe bankruptcy, according to the bank’s motion to convert to Chaptef 7.