CHICAGO (Legal Newsline) - Former Chicago Bears quarterback Jim McMahon has been sued by the Federal Deposit Insurance Corp.
McMahon was a board director of the bankrupt Broadway Bank from which the FDIC seeks $104 million plus interest for allegedly faulty loans made. These losses were caused by the alleged gross negligence of seven former directors of Broadway and two former officers of Broadway who approved the Loss Loans.
The FDIC alleges that the bank's former directors and two of its officers disregarded alerts the bank was engaging in risky loans. The lawsuit claims "gross negligence, negligence and breaches of fiduciary duty" by bank officials for 17 loans worth $104 million.
The action was filed March 7 in the U.S. District Court for Northern Illinois. According to the complaint, "As a member of the Board, McMahon approved the $28 million loan to Normandy Shores, LLC, which caused over $19 million in losses to the Bank. Despite his Board responsibilities, McMahon repeatedly missed critical Board meetings."
The complaint cites only McMahon's direct involvement in the Normandy Shores faulty loan. It does not mention him being involved with any other. But the FDIC did observe that McMahon repeatedly missed "critical board meetings."
The FDIC said, "In fact, the Director Defendants approved two of the worst Loss Loans on June 24, 2008, after a meeting earlier that same day with the Bank's regulators in which the regulators specifically warned the Director Defendants about the risks that these types of loans posed to the bank.
"That day, the regulators also discussed with the Director Defendants the need to enter into a Memorandum of Understanding with Broadway which would impose restrictions on the Bank designed to stop this type of high-risk lending. In all, the Defendants approved three Loss Loans on or after June 24, 2008, which caused over $20 million in losses to the Bank, and were among the largest Loss Loans approved by the Defendants."
McMahon served on Broadway's Board of Directors from 2003 through 2008 when he resigned. Reportedly his resignation was related to the bank's loan policies. The bank was closed April 2010.
McMahon, who led the Bears to their first Super Bowl in 1986 is one of many plaintiffs suing the NFL for its policies regarding player concussions.
Broadway Bank was owned by the family of Demetris Giannoulias. He approved each of the 17 loans. His brother, Alexi, was an officer at the bank that was founded by their father before being elected state treasurer in 2006. He is not named in the lawsuit. But questions about his involvement in the bank were a contributing factor to his loss of a U.S. Senate race
McMahon responded to the allegations by issuing a written statement March 7 quoted in the Chicago Sun Times.
He wrote, "With the advantage of 20-20 hindsight, the FDIC now blames Broadway's former officers and directors for not anticipating the same unprecedented market forces that also surprised central bankers, national banks, economists, major Wall Street firms and the regulators themselves. I am proud to have served as an outside, independent director for a brief part of the bank's history. The allegations in the complaint are utterly without merit, and I expect to be fully vindicated."