Beginning Next Week: InsideCounsel will become part of Corporate Counsel. Bringing these two industry-leading websites together will now give you comprehensive coverage of the full spectrum of issues affecting today's General Counsel at companies of all sizes. You will continue to receive expert analysis on key issues including corporate litigation, labor developments, tech initiatives and intellectual property, as well as Women, Influence & Power in Law (WIPL) professional development content. Plus we'll be serving all ALM legal publications from one interconnected platform, powered by Law.com, giving you easy access to additional relevant content from other InsideCounsel sister publications.

To prevent a disruption in service, you will be automatically redirected to the new site next week. Thank you for being a valued InsideCounsel reader!

X

FDIC sues former bank over cow-leasing scheme

Government seeks $11 million it says was lost due to the scheme

The Federal Deposit Insurance Co. (FDIC) has a beef with an insurer.

The governmental agency has filed suit on behalf of the now-defunct New Frontier Bank in Colorado, claiming the former lender was “wrongly denied” insurance coverage by its insurer, Kansas Bankers Surety Co.

According to the FDIC, the suit centers entirely on a cow-leasing scheme and funds the bank loaned to Johnson Dairy, one of the bank’s largest customers. New Frontier’s former Chief Lending Officer Greg Bell engaged in “multi-year criminal fraud” by using the bank’s money to assist the ailing dairy company because he “secretly had his hand in the till,” the complaint said.

“That is, Bell was getting improper personal benefits from the loans, such as cut of Johnson Dairy’s monthly cow lease payments to the bank’s borrowers, or a cash kickback from the loan—money Bell used for things like a new Corvette,” the suit said.

The purpose of the scheme was to get around a regulatory lending limit that prohibited New Frontier from continuing to loan money to Johnson Dairy. Eventually, the diary company filed bankruptcy, resulting in millions in losses for the bank as a result of the scheme—as much as $52 million.

Bell reached a plea deal earlier this year and is currently serving two and a half years in federal prison.

When the bank discovered the scheme, it filed a claim with its insurer, Kansas Surety, but the request was immediately denied. The FDIC—which lost more $650 million as a result of New Frontier’s ultimate collapse—then filed its suit against Kansas Surety.

Read more about this suit on Capital Press

Editor

Cathleen Flahardy

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.