Former Nevada banker Douglas E. French has agreed to pay a $35,000 fine to settle a regulatory complaint charging he engaged in unsafe lending practices at the now-failed Silver State Bank, allegedly contributing to millions of dollars in loan losses there.
The Federal Deposit Insurance Corp. disclosed the settlement Friday in its monthly report summarizing recent enforcement actions against banks and bankers nationwide.
In January,the FDIC revealed misconduct allegations against 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.
Silver State, with 17 branches in Nevada and Arizona, had loans and other assets of $1.887 billion. It was hit hard by bad loans in the risky real estate sector, where Silver State was known as an aggressive lender.
In January, the federal regulators revealed they had 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.
In the settlement disclosed Friday, French didn’t admit or deny charges of unsafe or unsound banking practices and breach of fiduciary duty, but agreed to the employment ban and to pay the $35,000 "civil penalty."
The FDIC didn’t say in Friday’s announcement why it agreed to the smaller fine. Such settlements typically are entered to avoid the costs of lengthy litigation.
French, who was paid $652,000 in 2007, was accused by the FDIC of using inflated appraisals, having a conflict of interest with an appraiser and approving questionable loan disbursements. He was linked by the FDIC to at least $10 million in loan losses at the Henderson-based bank, the failure of which is expected to ultimately cost the FDIC more than $450 million once all its bad loans are resolved.
French couldn’t immediately be reached for comment Friday, but in January he called the FDIC complaint "no more than a series of unsubstantiated claims cobbled together in an effort to find a scapegoat for the collapse of Silver State Bank."
French, known not just as a banker but as a libertarian columnist, now is president of the Ludwig von Mises Institute in Auburn, Ala., a libertarian social and economic think tank.
A second former Silver State banker, Steven D. Haynes, was hit with asimilar FDIC enforcement action in September.
That complaint wasn’t listed in Friday’s monthly FDIC enforcement update, indicating it hasn’t been resolved.