DUNEDIN, Fla. - Did you think all of the financial institutions that were bailed out by the federal government were on Wall Street? Uncle Sam has had to throw a financial lifeline to Main Street, too.
In the Tampa Bay area, 16 community banks have failed since 2008. Those failures alone have cost the taxpayer-backed Federal Deposit Insurance Corp. $1.2 billion.
Were these local bank failures simply unavoidable casualties of the Great Recession?
An ABC Action News I-Team review of federal audits and other records shows at least one of these closed banks had problems well beyond just getting caught up in a Florida real estate bubble that burst.
In 2007, Century Bank loaned $5,655,000 to Clearwater real estate developer Jeffrey J. Ricketts so he could build an 11,989-square-foot, 12-bedroom, 11-bathroom mansion for himself on the Dunedin waterfront. The Sarasota savings bank made the loan despite Ricketts getting all of his debts discharged in a Chapter 7 bankruptcy liquidation in 1992.
By 2010, Ricketts was once again in U.S. Bankruptcy Court, petitioning to be relieved of more than $30 million in debts, including the $5.6 million owed to Century for the construction mortgage on his dream house. Ricketts stated in the 2010 Chapter 7 petition that he had been a driver for a long-distance medical transport service for a year.
Ricketts' would-be neighbors in Dunedin have been unhappy that he and Century, which was seized by regulators in 2009, left a hulking, partially-built edifice to sit idle and neglected for more than four years.
"If I owe $1,000, I'll have bill collectors banging on my door," said retired New York City police officer Tony Beneri, who lives across Edgewater Drive from the property. "$5.6 million -- where is it? It's not there, believe me."
A 2011 audit by the U.S. Treasury Department's inspector general cited the Ricketts mortgage as one of six bad loans that contributed to Century's failure.
The auditors found that 98 percent of the Ricketts loan had been disbursed by the middle of 2009, yet only 70 percent of the mansion had been finished. Court records show the bank blamed a private building inspector it had hired to approve construction draw payments to Ricketts, who acted as his own contractor until he abandoned the project in 2008.
Ricketts, 55, who appears to have moved to California since his latest bankruptcy case was closed, couldn't be reached for comment.
The Ricketts mortgage wasn't the only problem loan in Century's portfolio.
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Also in 2007, Century made a $12 million loan secured by a mortgage on a luxury home in Columbus, Ohio, which is more than 1,000 miles from the bank's Sarasota headquarters. Century didn't verify the borrower's stated sources of his personal income, according to the auditors.
The I-Team asked Ellen Wilcox, a Florida Department of Law Enforcement loan fraud specialist, to examine the inspector general's Century report. She noted several irregularities with the Ohio loan.
The bank accepted an appraisal of the 27,400-square-foot Ohio residence that used homes in Georgia and Tennessee as comparable properties, the auditors found. Comparable properties used in a bank appraisal should be within a confined geographic area, Wilcox says, not in different parts of the country.
"Somebody obviously didn't look at this appraisal very well, or didn't look at it at all," said Wilcox. "That is not a valid appraisal. So you have a fraudulent appraisal on this property."
A 2006 agricultural loan in Manatee County caught the attention of the federal auditors as well. The $9 million loan became delinquent within two years. But Century executives wanted to hide that fact from regulators, according to the inspector general. So the Century executives advanced another $921,000 to the borrower from the bank's own capital to pay overdue interest on the original loan, which turned out to be secured by the fifth of five mortgages that encumbered the same 273 acres of farmland.
Century was owned by Century Financial Group Inc., which is controlled by 68-year-old businessman Barry W. Florescue. The I-Team left telephone messages at Florescue's Pompano Beach office seeking his comments on the Century failure, but they went unreturned. In 1997, federal regulators fined Florescue $50,000 for allegedly letting Century pay personal expenses for his family, including a luxury automobile for his wife.
About a year before regulators closed Century, the auditors say executives of the bank backdated a $7 million capital contribution so it would look like the bank was in a stronger financial position at the end of a quarterly
reporting period than it was.
The I-Team uncovered additional records that show Century made two other bad loans secured by property that the bank later had to fight the U.S. Department of Justice to foreclose on. Federal prosecutors contended the real estate had been purchased with cash from illegal narcotics activity and was thus subject to seizure by the U.S. Drug Enforcement Administration.
Sarasota banker Kjell Purnell, who works with consumers to align their investments with their religious or political beliefs, recalls 2005 through 2008 as frantic years in Bay area community banking.
"It was a competitive market," said Purnell. "We placed our bankers in a position where if consumers were asking for something and --- as a banker you want to deliver it --- if you couldn't, they'd go down the street and get it somewhere else. And that's a pressure that is hard to resist."
As loan portfolios started to tank, Purnell says some local bankers became desperate. "We started to see things deteriorate in 2007, very quickly." he said. "So we really saw folks that were starting to panic then."
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