Bank lawsuit alleges mismanagement

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Courts > Former LANB officers Cook, Enloe named in suit

By Tris DeRoma

A lawsuit filed by Los Alamos National Bank, and its parent company, Trinity Capital Corporation, in the U.S. District Court of New Mexico is alleging that two former LANB officers financially mismanaged the bank’s loan department to such an extent that it triggered an investigation by the federal government.
Though those officers have left the bank, at least one of them, William Enloe, who was the bank’s chief executive officer at the time the mismanagement was uncovered, has filed a countersuit in the U.S. District Court of New Mexico alleging that he was not to blame and that he should be indemnified for travel, legal and other expenses incurred by him through TCC and LANB when he was subpoenaed by the federal government in 2013.
The other person named in the bank’s suit is Jill Cook, who was the bank’s senior vice president and chief credit officer for the Los Alamos bank at the time as well. According to court records, Cook is alleging that LANB wrongfully terminated her, as well as engaged in gender discrimination.
Cook is also demanding that TCC and LANB indemnify her for legal representation incurred during the federal investigation as well as related costs.
However, on July 30, Enloe’s attorney, Mark Dow, filed a “dismissal without prejudice” motion, effectively withdrawing his lawsuit against Trinity Capital Corporation. As of press time, Dow has not stated a reason as to why his client has withdrawn his suit, nor has the judge in the case, United States Magistrate Judge William P Lynch, made an opinion on the motion.
Cook could not be reached for comment, so it is not known what the status of her complaint with TCC and LANB is as of press time.
According to court records, Trinity Capital Corporation’s suit against Enloe, Cook and related parties continues, the latest motion being a summons filed for Atlantic Specialty Insurance Company, one of the two insurance companies that TCC employs to indemnify the costs of defending its employees involved in legal matters involving LANB and Trinity Capital Corporation.
TCC is alleging that it has yet to be compensated through Atlantic Security Insurance Company and Federal Insurance Company for the other employees it chose to indemnify who were also subpoenaed along with Enloe and Cook. Though an exact figure has not been named, numerous bank officers and employees were subpoenaed.
According to court documents, the bank’s financial troubles began in 2007, during the “global financial crisis” and “ensuing global recession” that began in that year.
During that period, as New Mexico’s economy began to decline, “LANB experienced an increase in problem loans and a decrease in the collateral values supporting its loan portfolio,” a statement in the suit alleges.
In 2012, the U.S. Department of the Treasury’s Office of the Comptroller of the Currency launched an investigation into LANB’s problems where it found “unsafe or unsound banking practices relating to management and board supervision, credit underwriting, credit administration, and deficiencies in internal controls,” according to a statement in the lawsuit. LANB agreed to correct the problems.
Meanwhile, the bank’s parent corporation, Trinity Capital, filed a report with the U.S. Securities and Exchange Commission disclosing the source of what led to the “unsafe and unsound banking practices” which included “misstating its financial statements, particularly in the areas of the provision for loan losses and its allowance for loan and lease losses and as a result, misstating its net income in filings with various federal regulatory agencies, including the OCC and the SEC,” read a statement in the lawsuit.
Court records state the financial mismanagement started in 2006 and continued through the first two quarters of 2012.
TCC also said to the SEC that it needed to correct particular financial statements from 2011 and 2012, and that financial data from 2006 through the first two quarters of 2012 should not be relied upon.
In 2013, the SEC launched an official investigation into the factors that led up to the corrections and the subpoenaing of bank officers and employees, including Enloe and Cook.
Though TCC paid for the legal representation and other costs for all of the employees involved in the investigation, it did not compensate Enloe and Cook.
According to court documents, TCC and LANB based their decision on the opinion of an independent legal counsel that stated LANB and TCC could not in good faith make a determination that Enloe and other former officers at LANB “acted in good faith or in a manner that those individuals believed to be in the best interests of TCC or LANB.”
TCC is alleging that the mismanagement was not only all the fault of Enloe and Cook, but the two tried to cover up the mismanagement by participating “in a scheme to manipulate LANB’s problem loans and to hide the true nature of LANB’s loan portfolio, which resulted in LANB materially misstating its provisions for loan losses and its allowance for loan and lease losses during the relevant time periods,” according to a statement in the lawsuit.
John Gulas, CEO of LANB, said Friday he couldn’t make any comments on the current situation as an outcome is still pending.
A trial date has yet to be set.