First reported 2/17/2010 7:46 p.m.
In a federal court filing last week, FBOP Corp. is claiming that a group of lenders led by JPMorgan Chase brought about action last year that derailed the Oak Park company’s effort to keep its banks.
FBOP Corp. charges that Chase’s lawsuit in June, which called in a $246 million loan, took advantage of the company’s “fragile financial status” and pushed demands “further and further beyond commercially reasonable bounds.”
Four months after the Chase suit was filed, federal regulators seized FBOP Corp.’s nine banks, including Park National in Oak Park, and sold them to Minneapolis-based U.S. Bank. FBOP Corp.’s sole owner, River Forest resident Mike Kelly, had been working to raise the capital the feds had demanded by Oct. 30, but he missed that deadline.
The federal takeover came after a year of dance steps between federal regulators and the nearly three-decade-old bank-holding company, one that for most of the 1990s was a national model for against-the-odds growth. Troubles for FBOP Corp. had begun when the U.S. government seized Fannie Mae and Freddie Mac, two federally sponsored mortgage companies. That seizure forced hundreds of banks to write down the value of their preferred shares in these companies to just about nothing. FBOP’s loss was $855 million. Hope for a federal bailout was lost when, despite initial approval for funds from TARP – the U.S. Treasury’s Troubled Asset Relief Program – FBOP was put off because guidelines weren’t in place for small, privately held banks.
Since last February, when it became clear that FBOP was ineligible for TARP funds, a nonstop search began for private investors.
“Chase’s misconduct was a substantial contributing factor to FBOP’s inability to raise the new capital needed for its survival,” the filing reads.
In the court filing, FBOP is asking a judge to compel Chase to produce records showing why the lawsuit in June was necessary.
Chase had filed the suit as an agent for several other banks, trying to collect the balance of a loan taken out in 1997. According to the lawsuit, the $246 million principal balance was due May 28, 2009, and FBOP “did not pay the notes on such date.” Along with the principal, the Chase suit sought payment of attorneys’ fees and interest, accruing at $35,383 a day since May 28.
FBOP’s Chief Financial Officer Michael Dunning said last year that FBOP had been working with the lending group to extend the line of credit, which it had been doing annually since 2001. For years, the loan package had given FBOP the capital it needed to run its banks. The loan, according to court documents, had been amended 19 times.
“Chase insisted during the ensuing negotiations on terms that were commercially unreasonable, were destructive of FBOP’s ongoing ability to raise capital, interfered with FBOP’s business relationships and were harmful to FBOP’s ability to conduct business in the ordinary course,” according to the filing.
FBOP claims that Chase has “stonewalled” and withheld documents related to the case. In the filing, FBOP is asking a federal judge to force the bank to produce them.
“It flies in the face of the Federal Rules of Civil Procedure and pertinent case law, and casts doubt on the bona fides of Chase’s entire position in this matter,” the filing states of the undisclosed documents.
A Chase spokeswoman said through e-mail that the company does not comment on lawsuits.
In an e-mail listed as part of court documents, Heather Macklin, one of Chase’s lawyers, said the documents FBOP is seeking wouldn’t help its defense.
“There is no legitimate basis to require the bank to expend substantial time and money to gather and produce documents that cannot, in any way, impact this litigation,” Macklin wrote.