Former exec at failed Silver State Bank linked to $10 million in losses

By Steve Green

Published Friday, Jan. 28, 2011 | 9:28 a.m.

Updated Friday, Jan. 28, 2011 | 9:41 a.m.

Regulators today disclosed enforcement actions against a former executive at the failed Silver State Bank of Henderson, charging him with misconduct and associating him with bad loans that cost the Southern Nevada real estate lender more than $10 million.

Charges of misconduct issued Dec. 17 were made public today by the Federal Deposit Insurance Corp. against Douglas E. French, who was the bank's executive vice president and real estate manager until he resigned on May 15, 2008 -- about four months before Silver State failed and was taken over by the FDIC.

The FDIC said it proposed to fine French $125,000 and bar him from working for any FDIC-insured bank without the prior approval of the FDIC and other federal bank regulators. If French contests these actions, a public hearing would be held on whether they should be sustained, possibly in Las Vegas.

French today denied the FDIC's allegations.

"The FDIC complaint is no more than a series of unsubstantiated claims cobbled together in an effort to find a scapegoat for the collapse of Silver State Bank. FDIC has unfairly singled me out even though the practices and procedures I followed at the bank were industry standard, reviewed by FDIC examiners at the time and made in the best interest of the bank. I strongly believe that I acted appropriately based on what was known and reasonably foreseeable at the time. I look forward to the opportunity to confront these baseless allegations and fully expect to be vindicated," French said.

French, known not just as a banker but as a libertarian columnist, is now president of the Ludwig von Mises Institute in Auburn, Ala., which says it advances the scholarship of liberty.

Silver State, with 17 branches in Nevada and Arizona, had loans and other assets of $1.887 billion.

When French left the bank, Silver State publicly said it was for "personal reasons." But according to the FDIC, French has testified that he was asked to leave the bank.

Today's FDIC report said French had been paid about $98,000 in loan fee commissions involving certain loans that later went into delinquency, costing the bank and the FDIC as its receiver losses that may top $10 million.

In all, French's annual salary, bonuses and other compensation totaled $652,000 in 2007 and $604,000 in 2006, a filing with the Securities and Exchange Commission shows.

The FDIC report indicates the bad loans involved the bank's largest borrower, real estate developer Thomas Jurbala, and that in "orchestrating, underwriting, recommending and administering loans" to Jurbala's companies, "French violated various federal laws and regulations, engaged and/or participated in unsafe or unsound banking practices and breached his fiduciary duty to the bank."

The FDIC said that in connection with some of these loans to Jurbala or his companies, French at times failed to disclose information to the bank's senior loan committee, used inflated appraisals and approved questionable loan disbursements.

Other alleged violations of bank policies included him knowingly accepting falsified loan documents, not performing adequate financial analysis in making a loan and not fully disclosing a conflict of interest with an appraiser who allegedly submitted a "grossly inflated" appraisal for a loan. The FDIC said French and this appraiser, whom it didn't identify, had business and social relationships.