Former Loan Officer Gets Blame for Seven-Figure Losses

by Mark Friedman  on Monday, May. 3, 2010 12:00 am  

It's starting to become clearer why Southern Bancorp of Arkadelphia took everything but the loan portfolio when it bought Timberland Bank of El Dorado last year.

A federal lawsuit filed by Timberland in an attempt to enforce a $2 million bonding contract unveils some previously hidden problems allegedly caused by its former chief lending officer, Mark Turner, who was fired in the summer of 2008.

Court filings also reveal that the FBI and federal prosecutors have been investigating Timberland's lending practices.

The bank alleges that Turner lent money to companies in which he had a secret interest and received kickbacks from borrowers, according to documents filed in the lawsuit against BancInsure Inc. of Oklahoma City.

Beginning in 2003, according to the lawsuit filed in U.S. District Court in El Dorado, Turner and other unnamed "third-parties involved in the transactions successfully concealed Turner's dishonest acts and financial benefits until the summer of 2008."

Turner, who recently filed for Chapter 7 bankruptcy protection and listed debts of $1.46 million and assets of $950,000, referred questions to his attorney, Robert Trammell of Little Rock.

"Through today, certain former Timberland Bank board members have waged a whisper campaign of denial, and blame-shifting to Mark Turner," Trammell said in a statement to Arkansas Business. "He was the convenient fall-guy for the bank's failure as 'senior loan officer.'

"Turner has not benefited personally from any loan made to any borrower that he produced," Trammell wrote.

By the time Turner was fired, Timberland was in trouble. On July 31, 2008, the Federal Deposit Insurance Corp. issued a stern 28-page cease-and-desist order that told Timberland to clean up its lending practices. In that year, Timberland lost nearly $3 million after charging off more than $5.6 million worth of loan assets.

Tandy Menefee, who had been Timberland's CEO, said last week that directors thought it was in the shareholders' best interest to sell the bank, which had been chartered in 2000.

In March 2009, Timberland Bank announced the sale to Southern Bancorp. CEO Phil Baldwin said last week that Southern didn't pay anything to buy Timberland, but it allowed the Timberland shareholders to keep the approximately $10 million worth of loans that were still on the books.

"We had concerns about those loans and felt like there might be some in that pool of loans that could not be collected," Baldwin said. "The stockholders felt like they were all good loans, and so we just agreed that their consideration for the transaction will be that pool of loans."



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