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Banco BuenaVentura investors go after company’s remains

By   /   Friday, September 23rd, 2011  /   Comments Off on Banco BuenaVentura investors go after company’s remains

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Investors in now defunct Banco BuenaVentura are claiming the bank’s founder and his son defied orders from federal banking regulators and siphoned off investor money to pay for beachside condominiums and charted jet rides before regulators demanded that the bank liquidate in 2009.

The allegations emerged in a lawsuit against the onetime Oxnard bank filed in Ventura County Superior Court. Banco BuenaVentura opened its doors in late 2008 to serve the “unbanked” Hispanic population but liquidated itself less than a year later, shortly before a raid by the FBI.

Documents obtained by the Business Times show that plans for the unconventional bank reached Sheila Bair, then the chairman of the Federal Deposit Insurance Corp. and the nation’s most powerful banking regulator. A personal letter from founder James Montgomery, a veteran banker with ties to Bair, regarding a “prefiling conference” reached Bair’s desk on Nov. 6, 2007, the day before Banco BuenaVentura applied for its federal banking charter.

It is not possible to discern what Bair knew of Banco BuenaVentura’s plans because an email released to the Business Times under the Freedom of Information Act was heavily redacted. But what followed was years of wrangling between James Montgomery and banking regulators who wanted to bar his son, Jeff Montgomery, from taking part in the bank because of a mortgage foreclosure and a drug-related arrest in the Cayman Islands.

After eventually agreeing to exclude Jeff Montgomery, the bank got off the ground. But by May 2009, the FDIC demanded that Banco BuenaVentura liquidate itself and the bank’s offices were raided by the FBI in August 2009.

In their civil lawsuit in the Ventura court, investors claim the demand to liquidate came for these and other reasons:

• Jeff Montgomery was actively involved in the bank in defiance of regulators’ orders.

• James Montgomery paid himself $200,000 a year after promising regulators to cut his salary to zero.

• Investor money was used to pay above-market rents for fully furnished beachside condominiums for Jeff and James Montgomery and for rides on a charter jet that James Montgomery partially owned.

Investors also claim in the lawsuit they were not told of that spending or of the bank’s regulatory troubles.

They allege Jeff Montgomery’s family trust charged unreasonable rents for the bank’s lease in the historical Bank of A. Levy building on Fifth Street in Oxnard and that James Montgomery improperly obtained an $800,000 tax refund that belongs to investors. The investors allege that least $3 million in cash was left as of December 2009 that should have been given back to them.

James Montgomery could not be reached for comment. Lee Dresie, an attorney for Jeff Montgomery, called the complaint “largely just a re-hash of unfounded and untrue allegations which were raised and resolved nearly two years ago” regarding the bank’s lease.

In 2009, Jeff Montgomery and his family trust sued the bank over unpaid rents to the family trust. A judge sided with James Montgomery and his family trust.

“That ruling was correct then, and remains correct today,” Dresie said in a statement to the Business Times. “I believe this nuisance suit will be dismissed by the court, either on a motion to dismiss or a summary judgment motion.”

Michael Ring, the attorney representing the investors, said the earlier lawsuit settled only the question of whether the bank owed rent to Jeff Montgomery and his trust under its lease agreements. It did not address the legal questions of whether those lease agreements were proper in the first place or whether the bank’s leaders properly told investors how their money was being spent, he said.

“[The prior lawsuit] has nothing to do with our claims other than it indicates the extent to which my clients were misinformed and abused financially,” Ring told the Business Times. “What we’re claiming is that their interests were, by law, required to be protected honestly and in good faith. We believe that did not occur.”

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