Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Friday, December 8, 2023 | Back issues
Courthouse News Service Courthouse News Service

United Western Bank Says FDIC Abused Power

WASHINGTON - United Western Bank sued the Federal Deposit Insurance Corp., claiming the FDIC's Jan. 11 receivership and seizure order was "arbitrary and capricious and lacked any basis in applicable law." The bank claims: "If the standard applied by the OTS [Office of Thrift Supervision] to United Western was uniformly applied to banks across the country, a significant number of those banks would be subject to immediate seizure."

In its 27-page federal complaint, United Western claims "the defendants have in this case profoundly abused their enormous powers to protect the banking system and the FDIC Deposit Insurance Fund by seizing an economically viable bank with over $400 million in available cash - fully 20 percent of its total assets at the time."

The Office of Thrift Supervision ordered United Western in December to take a capital write-down "with the intent of lowering the bank's capital ratio just as much as was necessary to create the illusion that the bank was not adequately capitalized," the bank claims.

Doing so reduced United Western's capital ratio to 7.8 percent, just 0.2 percent lower than adequate capitalization.

United Western claims that the 7.8 percent figure proves that it had the money to back up its obligations.

"The majority of institutions closed by the OTS in 2009 and 2010 were critically undercapitalized, meaning that the ratio of tangible equity to total assets was less than 2 percent. A number of these institutions were insolvent," United Western claims.

It adds: "The seizure of a bank with a reported total risk-based capital ratio of 7.8 percent and a pending recapitalization is unprecedented. If the standard applied by the OTS to United Western was uniformly applied to banks across the country, a significant number of those banks would be subject to immediate seizure."

According to the complaint, the FDIC seized the bank based on three grounds: it was undercapitalized and failed to submit a capital restoration plan within a reasonable amount of time; it was unlikely to pay its obligations or meet depositors' demands; and it was in "unsafe or unsound condition" to transact business.

United Western says it was making "significant strides" toward closing on a $200 million recapitalization, which would have made it stronger, but the feds stepped in anyway, giving the bank just seven days to submit a capital restoration plan, though the standard time is 45 days.

The bank claims that the OTS has not accepted any restoration plan submitted "during this financial crisis," but routinely rejects them and asserts "that the failure to submit an acceptable capital restoration plan is grounds for receivership."

The bank says that when it was seized, its "liquidity position was secure. United Western's policy was to keep no less than $100 million in cash."

It claims it had more than $403 million available to support its $1.6 billion in deposits, and $2.1 billion in total assets when the receivership and seizure order was issued.

United Western is joined by its sole shareholder, United Western Bancorp Inc. and four directors in its suit against the FDIC and the OTS.

The bank seeks an injunction removing the FDIC as receiver, returning control back to the plaintiffs.

United Western and its directors are represented by Andrew Sandler with Buckley Sandler.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.