© 2014 The Texas Lawbook.
By Jeff Bounds
Staff Writer for The Texas Lawbook
(April 28) – A federal judge has thrown out a whistleblower lawsuit by a North Texas businessman who alleged that the North Carolina banking giant, BB&T Co., was involved in a scheme to defraud an arm of the federal government out of millions of dollars, court records show.
In an April 11 court opinion, U.S. District Judge Jane Boyle said that Mark Wismer failed to specify enough facts in his petition to support the fraud claims against the bank, whose formal name is Branch Banking and Trust Co.
The scheme in question centered on BB&T supposedly manipulating the sale of promissory notes to inflate reimbursements it was getting from the Federal Deposit Insurance Corp., court records show.
Those reimbursements were for loan losses BB&T sustained relating to its August 2009 acquisition of Alabama-based Colonial BancGroup Inc., court records show. Colonial was the one of largest bank failures on record.
Wismer’s lawsuit could have thrown into question BB&T’s management of roughly $16 billion in Colonial assets that BB&T acquired through the FDIC. The litigation never got that far.
The internal investigations into Wismer’s complaints by both BB&T and its outside counsel at Kane Russell Coleman & Logan concluded that the bank’s actions were in compliance with its obligations under the purchase-and-assumption agreement with the FDIC, court records say.
In addition, that pact with the FDIC required the bank to exercise “sound business judgment” in managing the former Colonial assets, court documents show.
This was Wismer’s second try since 2012 to forge a complaint that would pass muster as a whistleblower suit under the federal False Claims Act, court records show. Concluding that the likelihood was low that another re-working of the complaint would get the job done, Boyle barred Wismer from re-filing the lawsuit against BB&T, court records show.
Judge Boyle ruled that Wismer’s “newly asserted facts reveal nothing unlawful, or even suspicious, on BB&T’s part.”
Now Wismer could have to pay BB&T’s attorney fees in the case, court records show. Boyle instructed the two sides to tell her by April 26 whether they want to do briefings about BB&T’s legal expenses.
“We consider the ruling an outstanding result that vindicates our client,” said Kenneth Johnston, a Kane Russell director who led the BB&T defense effort.
Added David Clem, a Kane Russell associate: “BB&T responsibly managed the (Colonial) assets and minimized losses in a way that the industry might not have anticipated.”
An attorney for Wismer, Levi McCathern, II, could not be reached for comment.
Wismer is affiliated with a Dallas business called Stonemoss Capital Corp., according to court records and a filing with the state comptroller’s office.
Why Wismer’s suit failed
Wismer’s suit was an attempt to sue on behalf of the U.S. Government under the False Claims Act. Plaintiffs who win those types of cases can get up to 30 percent of whatever the U.S. government recovers.
The scheme Wismer purportedly discovered centered on what’s known as a “shared loss agreement” between BB&T and the FDIC as part of the Colonial takeover.
That pact essentially requires the FDIC to reimburse BB&T for some losses it might incur on commercial loans that the bank acquired through the FDIC’s receivership of Colonial. In the same vein, that agreement calls for BB&T to share in profits that the bank gets from those same Colonial loans.
Wismer’s complaint alleges that two issues existed:
• A BB&T employee supposedly received “kickbacks” on at least two promissory notes whose face value was cut through transactions with an outside broker. That ultimately let borrowers buy back the notes at a reduced value, while putting millions of dollars in the pocket of the BB&T employee, court documents say. That BB&T employee has since left the bank.
• The FDIC also reimbursed BB&T for the bank’s paper losses on the transactions involving the two promissory notes, court papers allege.
Court records and Kane Russell attorneys stress that there is no evidence of any wrongdoing by any current or former BB&T employees. Nor, they add, is there any evidence to support Wismer’s claims that the bank tried to defraud the FDIC.
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