Tuesday, September 19, 2017

FNBC is looking to "lawyer up"

Some of the principles at the failed First NBC bank are starting to worry about the legal trouble they find themselves in. From the looks of things, they planned for this very scenario ahead of time.
Well before the bank failed, it took out five insurance policies aimed at protecting bank directors and officers from personal liability for bank business, court filings show. The company held roughly $60 million in insurance policies.

On Tuesday, attorneys for First NBC Bank founder and former CEO Ashton Ryan Jr. and former Chief Financial Officer Mary Beth Verdigets appeared before Magner after filing motions for their clients to begin collecting money from insurance policies, long held by the bank, to cover their mounting legal costs.

Magner deferred making a ruling on the insurance policies. At least one former bank official raised questions about how the proceeds would be tapped.

"People are getting demand letters, and they need to lawyer up," said William Aaron, a New Orleans lawyer who was a director of both the bank and its parent company. "The question is, is the court going to be a gatekeeper every time somebody needs to lawyer up?"
The Advocate reported a few weeks ago that a federal grand jury is looking into the bank now but we don't know what specific charges might be under consideration. We already knew that the bank collapsed as a result of Ryan's suspiciously risky bets on post-Katrina rebuilding tax credits that never paid off for the institution itself.

In the meantime, the scheming appears to have financed ventures benefiting some interesting public figures. Irvin Mayfield secured a pile of money from them he could throw into a pit. LaToya Cantrell bought a house which either she or the bank botched tax payments on for a while.  Then there was this elaborate scam where FNBC financed the "tuition rebate" portion of Bobby Jindal's school voucher program.
The tuition donation program is less generous but more flexible than vouchers, and it has grown fast after a slow start. Following an approach adopted by some other states, it relies on the tax code to direct money to private schools rather than the state appropriations that fuel vouchers. Last year, the tuition donation program allowed about 1,700 Louisiana children to attend 167 private schools, double the enrollment of the year before. Donors to the program are set to recoup about $7 million in taxpayer-funded rebates from last year's scholarships.
The program has been tweaked some in recent years. But it's still a means by which private schools and participating "donors" are heavily subsidized through an elaborate tax credit shuffle.
The basic setup is the same. Donors underwrite part, but not all, of a child’s private school tuition. Later, donors get back 95 cents for every dollar they give. And they can write the whole thing off as a charitable donation on their federal taxes.

Starting Jan. 1, though, donors to the program will no longer get recompensed via a state rebate that's paid out of general state tax collections.

Instead, donors will be repaid in the form of a credit on their state income taxes. That’s in line with how 16 other states already organize their own private school choice programs. Their tax payments then will be redirected out of the state treasury and into the hands of Louisiana private schools to offset student tuition.
The changes to the law will also limit participants to organizations who pay Louisiana income taxes. This will be sad news for some of the out of state participants who had been benefiting such as Chick Fil A and, yes, believe it or not, the Atlanta Falcons.

Anyway, getting back to FNBC, there's so much going on there that it's hard to pin down just what the Feds might be looking into. But you can see why they might be looking to being to lawyer up. You can also see why they might be reaching out for friends and allies who could still help them. One wonders, for example, if John Kennedy might be one such person.
WASHINGTON — In a Capitol Hill battle over the financial industry's use of arbitration clauses in contracts to limit class-action lawsuits, a key undecided Republican has attracted the attention of bank lobbyists and consumer advocates.

That person is U.S. Sen. John Kennedy, Louisiana's recent arrival in D.C. with a seat on the Senate's banking committee. So far, as the debate has started to percolate, Kennedy has kept his cards close the chest on how he might vote on a Republican-led effort to scrap an Obama-era regulation making it far easier for customers to bring class-action lawsuits against banks, credit-card companies and other financial institutions.
Kennedy is playing coy for now because he likes being feted by finance lobbyists, no doubt.  And maybe FNBC is more worried about criminal prosecution at the moment. But we're pretty sure John will be there, if not for FNBC, then for whoever the next fraud looking for legal protection might be.

No comments:

Post a Comment