A federal regulator has accused four former executives of a South Carolina bank with Charlotte roots of violating federal laws and regulations over condo purchases and other spending that took place while they were in charge.
It’s the latest blow to the founders of CertusBank, which grew out of a Charlotte-based company launched by former Bank of America and Wachovia executives in 2010 to buy distressed banks and rehabilitate them.
The enforcement actions announced this month by the Office of the Comptroller of the Currency come after three of the Greenville, S.C.-based bank’s executives were fired and one left in 2014 as Certus faced shareholder questions over its spending. The following year, grappling with quarter after quarter of losses, Certus announced the sale of its bank operations.
The comptroller’s office also charged two of the executives – including former co-CEO and director Charles Williams and former President Kathy Angela Webb – with “improper” payments totaling hundreds of thousands of dollars to a Charlotte firm founded by some of the bank’s top executives.
In agreeing to the consent orders, the executives did not admit or deny wrongdoing, but three were ordered to pay civil penalties.
The orders mirror similar claims made in 2014 by a New York hedge fund manager in letters distributed to Certus shareholders alleging executives improperly spent money on corporate condominiums, private jet flights and Carolina Panthers tickets, among other items.
According to the comptroller, all four executives – including former CEO and director Walter Davis and former Executive Chairman Milton Jones – caused Certus to violate federal laws and regulations through the bank’s 2012 purchase of three Greenville condos for the bank’s executive officers to use.
The executives failed to seek required board permissions for the condos as well as for other deals, including contracts for the build-out of the bank’s executive and administrative offices in Greenville, the comptroller’s office said. Board approvals were needed because the contracts were strategically important to the bank or in large enough dollar amounts that board action was required, according to the comptroller.
Webb and Davis were also accused of “excessive expenses,” including for travel by private jet. The comptroller said Davis, for example, used a private jet to attend a 2013 non-profit board meeting, which was a personal and non-bank-related matter. Such expenses resulted in losses to the bank, the settlement agreements say.
Buddy Parker, attorney for Webb, Davis and Jones, told the Observer it’s “significant” that the comptroller’s office did not find any fraudulent activity by his clients despite the regulator’s roughly two-year investigation.
“No monies going into Ms. Webb’s, Mr. Davis’, Mr. Jones’ pockets,” Parker said. “They found some unauthorized expenditures without board authorization that were deemed to be excessive. Significantly, there is no admission or denial of wrongdoing.”
The comptroller’s office also said Webb facilitated, and Williams approved, improper payments totaling $230,000 from the bank to Integrated Capital Strategies, a Charlotte-based asset management and advisory firm Williams and Davis founded in 2009. Webb is also listed as a manager of ICS on the North Carolina Secretary of State’s website.
The ICS figure included $155,000 in “incentive payments” to the firm’s contractors in January 2012, as well as a $75,000 payment in February 2012 for 1,000 hours of billed time in a single month by one ICS contractor, the comptroller’s office said. The payments were outside the scope of the agreements between the bank and ICS, according to the comptroller.
Williams and Webb were also found to have received “impermissible” extensions of credit from Certus in violation of federal regulations. Webb’s extension totaled approximately $179,000, according to the comptroller, which did not disclose a figure for Williams.
The comptroller fined Webb $27,000, Davis $25,000 and Jones $3,500.
The four had grown the company, which started as Charlotte-based Blue Ridge Holdings Inc., into a four-state operation with more than $1 billion in assets.
Certus opened a retail branch in Charlotte in 2012 and later bought Myers Park Mortgage.
After Certus piled up tens of millions in losses, shareholders began complaining about what they perceived to be exorbitant expenses for an unprofitable bank.
In 2014, the bank announced agreements to sell its mortgage and wealth divisions under a strategy designed to improve Certus’ financial condition. But the following year, Certus announced plans to wind down its bank operations and sell all of its remaining branches.