The senior executives of Irwin Union Bank & Trust Co. experienced the agony of watching federal regulators seize and shut down the storied Columbus institution three years ago.
Then, in 2011, the bankruptcy trustee for Irwin Union’s parent, Irwin Financial Corp., lowered the boom, suing the officers for breach of fiduciary duty and seeking more than $500 million in damages.
But now those defendants—CEO William Miller, Chief Financial Officer Gregory Ehlinger and Executive Vice President Thomas Washburn—are getting a reprieve. Federal Judge Sarah Evans Barker on Sept. 27 dismissed all claims against the men, saying the only party with the right to bring suit was the bank’s receiver, the Federal Deposit Insurance Corp.
And the FDIC opted not to act before the statute of limitations expired in mid-September, a reflection of the lack of merit of the case, according to Jim Knauer, an Indianapolis attorney representing the executives.
“The bankruptcy trustee’s complaint contains no allegations of intentional wrongdoing, no charges of conflict of interest, no allegations of violation of banking laws or regulations,” Knauer said.
“It just attacks the business judgments of the officers in the light of 20-20 hindsight applied to events during the near-collapse of the financial system and housing markets last decade.”
FDIC attorneys did not return calls.
It’s not clear whether bankruptcy Trustee Elliott Levin will appeal. He could not be reached for comment, and his attorneys at Rubin & Levin in Indianapolis and Kilpatrick Townsend & Stockton in Atlanta did not return calls.
The 45-page lawsuit charged top executives recklessly expanded in the early 2000s, diving into commercial lending in markets as far away as California and doling out residential loans for as much as 125 percent of a home’s value.
Along the way, the suit says, Irwin Financial executives allowed its subsidiaries “to operate on a virtually autonomous basis without managing or understanding … the risks being undertaken by the various lines of business, resulting in an ultimately fatal concentration (unappreciated by the IFC board) of real estate loans.”
A report issued by the Federal Reserve’s inspector general in April 2010 chastised regulators for failing to take strong action despite seeing red flags as early as 2001. The demise of Irwin Union Bank resulted in estimated losses to the FDIC’s deposit insurance fund of more than $550 million, according to the report.
Irwin Union, founded in 1871, was one of Indiana’s oldest banks. CEO William Miller was the son of legendary Cummins Inc. chief J. Irwin Miller and the fifth generation to run the bank.
Miller now serves as president of The Wallace Foundation in New York City, which focuses on enhancing educational opportunities for children.
New attorney for Fair executive
Convicted Ponzi schemer Jim Cochran is getting a new lead attorney, apparently after complaining about William Dazey, the veteran public defender who represented him at trial.
A federal jury in June found Cochran guilty on eight of 12 felony charges stemming from the collapse of Akron, Ohio-based Fair Finance Co. Cochran owned the firm with Tim Durham, who was convicted on all 12 charges. The third defendant, Fair Chief Financial Officer Rick Snow, was convicted on five of 12 counts.
Dazey’s folksy style appeared to play well with the jury. However, Cochran was hurt by wiretaps and other testimony showing he told Ohio residents who bought Fair investment certificates that everything was fine when the company actually was on the verge of collapse.
The court docket shows that Judge Jane Magnus-Stinson received a letter directly from Cochran on Aug. 24 even though he was represented by counsel. Her office forwarded the letter to Dazey without reading it but asked him “whether and in what form” it should be provided to the court.
That led to a meeting between the judge and Dazey in her chambers on Sept. 25. The same day, the docket shows, she appointed a new lead counsel but retained Dazey as co-counsel.
Court staff said the judge had no comment on the situation. After IBJ sent Dazey an e-mail seeking explanation, he sent an e-mail back with no text but with an attached photo of the mythological creature the sphinx—a symbol of the unknowable.
John Tompkins, Durham’s attorney, said he isn’t privy to what occurred. He said he and Snow’s counsel weren’t provided the letter and weren’t in chambers when the judge met with Dazey.
Criminal defense attorneys with no ties to the case say it isn’t unusual for defendants to question the quality of their legal representation when they’re convicted. The attorneys speculated that’s what happened here.
“When you lose, once in a while somebody is desperately looking for someone to blame,” defense attorney Bob Hammerle said.•