Lawsuit filed against SV Bank directors
Investors cite bad loans
A class action lawsuit on behalf of the shareholders of Sonoma Valley Bank (Sonoma Valley Bancorp) was filed Wednesday in Sonoma County Superior Court, Santa Rosa, by Berkeley attorney George Donaldson. The suit alleges the officers and directors of the bank breached their fiduciary duty in making certain large real estate loans and in reporting the bank's financial condition.
The lead claimant in the suit is Sonoma attorney Newton Dal Pogetto, who was a shareholder when the bank was seized on Aug. 25 last year by the California Department of Financial Institutions and turned over to the Federal Deposit Insurance Corporation (FDIC), which then sold the local bank's assets to Westamerica Bank.
In June of 2010, there were more than 2.3 million shares of the bank's common stock in the hands of shareholders, 21.5 percent of which was owned by bank officers and directors. There was no estimate available on the approximate number of shareholders who would be represented in the suit if the class action is allowed by the court.
The lawsuit alleges that the value of the bank's shares was... "attributable, in substantial part, to a series of large loans made by the bank to a small group of North Bay developers..."
As an example, the suit cited loans made to Marin County developer Bijan Madjlessi and two business partners that allegedly totaled $54.5 million, of which $45 million allegedly ended in default.
These and other alleged actions, the suit claims, caused the stock, which traded as high as $32 per share, to drop to "...approximately $.003 per share."
Madjlessi was arrested June 1 in San Rafael on suspicion of insurance fraud in an unrelated case after state Department of Insurance investigators probing a 2008 Reno fire at one of his real estate projects charged he had filed duplicate claims that allegedly defrauded two insurance companies of more than $860,000. He is currently free on bail.
Sonoma Valley Bank officers Mel Switzer and Sean Cutting were named in the suit, as were all of the Bancorp's board of directors, plus possible "Doe Defendants" to be named later.
Sonoma Bancorp officers and directors are covered by a $20 million insurance policy. It is expected that the insurance company will name an attorney to deal with the lawsuit on behalf of the defendants. Leah Knapp, public relations spokesperson for Progressive Casualty Insurance Co., said in response to the Index-Tribune's inquiry, "In the interest of their confidentiality, it is inappropriate for us to comment on current or former customers."
No former Sonoma Valley Bank officers or directors were available for comment on the claim. Dal Pogetto declined to offer any statement.