FDIC Lawsuit Outlines Alleged Fraud by ANB Officer

by Arkansas Business Staff  on Monday, Jun. 13, 2011 12:00 am  

The Federal Deposit Insurance Corp., acting as receiver for long-dead ANB Financial of Bentonville, has filed suit in federal court in Fayetteville against ANB's bonding company, St. Paul Mercury Insurance Co. of St. Paul, Minn.

Banks sure seem to have a hard time getting St. Paul Mercury to cover losses from fraud, as is alleged in the FDIC's suit - and in one that First Federal Bank of Harrison filed in 2009 and one that Chambers Bank of Danville filed last month.

But the problem with St. Paul is less interesting, it seems to your Whispers crew, than the underlying fraud that inspired the $11.7 million claim.

According to the FDIC's civil suit, an ANB officer named William Burton Hemm "colluded with two borrowers to defraud ANB."

In May 2006, the FDIC alleged, Hemm recommended that ANB's loan committee made a $30 million loan to the two borrowers "and an unnamed entity for the construction of a sports arena" in Bentonville.

After the loan committee denied the loan, Hemm originated nine other loans totaling $18.7 million to the borrowers, their family members and their companies in 2006 and 2007, and the loans were a mess - misrepresented purposes, missing paperwork, missing guarantees.

ANB ultimately suspended Hemm at the end of July 2007 but kept paying his salary through August of that year - and Hemm kept authorizing advances to the two borrowers. In return for a $365,000 payment, Hemm allegedly was paid a kickback of $30,000.

ANB was shut down by federal regulators in May 2008. The FDIC filed a sealed complaint against Hemm in bankruptcy court in Fayetteville in May 2010, and last month U.S. Bankruptcy Judge Ben Barry entered a nondischargeable judgment against Hemm of $11.7 million. That's what the FDIC is demanding that St. Paul cover under the terms of its bond.

The phone number listed for Hemm in Fayetteville has been disconnected.

Talley Who?
The business about the Bentonville sports arena sounds suspiciously like the 8,000- to 10,000-seat arena that a Memphis-area man named Chris Talley and his Arkansas Sports & Entertainment Park LLC announced in June 2006, although the site was later moved to Rogers.

The price tag on the project was variously reported as $43 million to $55 million, and, of course, it was never actually built.

We haven't been able to track down Talley to ask if he colluded with Bill Hemm to defraud ANB, but we do know this: ANB objected strenuously when Talley's company, CJC Development LLC, filed for bankruptcy in Memphis in July 2007 and planned to sell some real estate in Memphis without recognizing ANB's $5.1 million lien on it.

Talley had a co-debtor in the CJC Development bankruptcy named Jagtar S. Dhaliwal of Rogers, but whether Dhaliwal - whom we also couldn't reach - was one of the borrowers accused of colluding with Hemm is not known.

 

 

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