Bank Struggling After "Reckless" Practices; Loan Officer Faulted

FRANKFORT, KY -- A central Kentucky bank with powerful political connections is struggling to upright itself after what regulators say were reckless practices and a lack of proper supervision, reports the Lexington Herald-Leader in its Sunday edition.

For six years, the bosses at American Founders Bank praised loan officer James B. Tate for his aggressive lending across Central Kentucky, reports the Herald-Leader.

The sums Tate lent were ”extraordinary“ and ”far exceeded expectations,“ they raved. As his portfolio swelled by tens of millions of dollars, Tate climbed in the ranks to become executive vice president and senior loan officer, reports the newspaper.

His salary more than doubled to $165,000 a year, plus $134,000 in performance bonuses. Both Frankfort branches were placed under his command; cardboard cutouts of a grinning Tate adorned their lobbies.

But now borrowers allege that Tate's rise – which helped put the new, locally owned bank on the map – was fueled by fraud, the newspaper reports.

A growing stack of counter-claims by debtors say that, at Tate's direction, forged signatures shifted debt onto unsuspecting victims; schemes rolled bad loans around to keep them off the books; new loans went to hastily founded dummy corporations to pay off old loans; and Tate used loans to build himself a sprawling new Frankfort home, hiding his actions behind a ”straw man“ who ended up with the house and the debt, the Herald Leader reports.

Everything crashed last year. Federal and state regulators examined American Founders and uncovered enough serious problems – particularly bad loans and inaccurate records – to hit the bank with a ”cease-and-desist order,“ which put it on probation and warned it to clean up its act.

After the investigation, Tate was ordered to resign. So was his supervisor, bank President Tim Wesley. The board of directors – which includes former Gov. Brereton Jones and former state Democratic Party Chairman Tracy Farmer – was sharply criticized by regulators for inadequate supervision that allowed the mess to happen.

This year, American Founders is struggling to right itself. It is losing money, its capitalization is shrinking and 8 percent of its loans are at least 90 days past due, which is six times worse than its peer group, reports the Lexington Herald-Leader.

Copyright-The Lexington Herald-Leader

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  • by fdbfb Location: asf on Sep 10, 2009 at 07:38 PM
    Jim tate has been scapegoated. Hes done nothing wrong. The bank and the borrowers sold him out so that they can get big bank.
  • by Wes Location: Covington on Jul 14, 2008 at 08:36 AM
    American Founders Bank is on the list of 90 that the government says is in danger of failing within the next 6 weeks. I took my money out of 5/3rd Bank this morning because it's near the top of that same list.
  • by Zatoichi Location: Richmond on Jul 13, 2008 at 05:45 PM
    Stop making loans to people who can't afford them. Obama and Jesse Jackson are two big supporters of these lowered loan standards. In order to make homeloans more affordable for folks who really can't afford to buy a home to begin with. Now they blame everyone else for their own short sighted and witless laws.
  • by Jan Location: Pikeville Ky on Jul 13, 2008 at 04:35 PM
    Most of the time people get greedy. It's always a business practice to keep an eye on those employees that have an aggressive behavior in the work place. Most employers forget the actual employees that makes a business successful. I feel 50% of the blame should go to the supervisers!!!! Hope this employee goes to jail. Guess what this is called stealing!!!!!!
  • by Anonymous on Jul 13, 2008 at 03:40 PM
    What's with the banking industry? And Wall Street?
  • by Rob Location: Louisville on Jul 13, 2008 at 01:45 PM
    Looks like people are greedy and want to live above their means. No wonder the country is falling apart. Makes you wonder when you see these wives driving large suvs living in grand houses who are their husbands having to scam to put them there. Why not just live like normal people.


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