[Vision2020] Sharing the wealth: Ex-subprime bank executive finances Obama

[No Weatherman]

Ex-subprime bank executive finances Obama
Jerry Seper

John W. Courtney's world collapsed at dinnertime on a Friday in July
2001. That's when he learned from a television newscast that much of
the $200,000 that he had saved from his construction job over a
30-year period was lost when his Chicago-area bank was shut down after
pursuing a failed strategy of subprime loans.

Seven years later, the Vietnam War veteran has yet to recoup $85,000
of his uninsured losses from Superior Bank's failure. And he watches
in disbelief as one of the bank's former top officials, billionaire
hotel heiress Penny Pritzker, leads the record-breaking fundraising
machine of Democratic presidential candidate Sen. Barack Obama.

Mr. Courtney, now 63, wonders aloud how Mr. Obama could rail on the
campaign trail against the national financial crisis started by
subprime lending while allowing a former advocate of the practice to
hold the senior position of finance chairwoman in his campaign. The
candidate has even lauded Ms. Pritzker's business practices as a model
for an Obama administration.

"He knows the Pritzker family. He knows what happened in Illinois. He
knows that Superior Bank was one of the first to securitize subprime
mortgages," Mr. Courtney said. "He talks about change and helping
people find a better way of life, but he has distanced himself from
the fact that Superior helped ignite the nation's subprime crisis and
that Penny Pritzker and her family walked away from it and us."

The Obama campaign does not dispute that Ms. Pritzker advocated
subprime lending as the bank was failing but said she was "never
accused of any wrongdoing nor did she receive compensation in relation
to the closing of Superior Bank." The campaign said that instead of
"walking away as millions of homeowners and stockholders suffered, the
Pritzker family entered into a voluntary settlement and agreed to pay
the government" $460 million that the bank cost taxpayers over 15
years to defray its losses.

That's little solace to the victims of Superior Bank's failure, who
are still attempting to recoup their losses via a lawsuit and feel
left behind in the current financial crisis, which was spurred, in
part, by the very same subprime lending that sank their deposits.

"Ms. Pritzker should be fired by the Obama campaign because of how
these matters were handled," said Anne MacKay of Arlington Heights,
Ill., whose aunt Irene Kortas'estate is still owed about $40,000 from
the $209,000 she lost when the bank closed seven years ago. Miss
Kortas died at age 79, one year after learning that her savings had
been lost.

"She trusted these people and she trusted the Pritzker name, which is
well-known in Chicago," Mrs. MacKay said. "They had given her a
toaster and a set of glasses, but obviously they didn't know what they
were doing when it came to protecting her investment."

A 'complex' failure
Ms. Pritzker, now chairwoman of Classic Residence by Hyatt, a chain of
luxury senior living communities throughout the United States, is
listed among Forbes' magazine's 2008 richest Americans with a net
worth of $2 billion.

She serves as both the finance chairwoman overseeing Mr. Obama's
fundraising as well as one of his "bundlers," who have pledged to
personally raise between $200,000 and $500,000 for the candidate. She
has contributed nearly $500,000 to Democratic candidates and political
action committees since 2000.

Her attorney, Kevin Poorman, said Ms. Pritzker had stepped down from
day-to-day management as the bank's chairwoman in 1994 for a role
instead on its parent company's board of directors and had "little to
do" with the bank's daily operation by the time it failed. Still, Mr.
Poorman confirmed that she did write a letter as late as May 2001
urging the bank to make an expanded push into subprime loans in an
effort to save itself.

Critics have cited that letter as evidence of Ms. Pritzker's
continuing stewardship of the bank and her advocacy for a subprime
lending practice that Mr. Obama has criticized. In the letter, Ms.
Pritzker wrote that her family was recapitalizing the bank and pledged
to "once again restore Superior's leadership position in subprime
lending." The bank was shut down two months later.

Mr. Poorman said the letter was based on information from a bank
accountant that later turned out to be inaccurate.

"The financial statements she relied on had been audited and
previously approved by regulators, but were overstated and, as a
result, the bank was not capitalized sufficiently," the attorney said.
"No one regrets that the bank failed more than Ms. Pritzker."

The Federal Deposit Insurance Corp. (FDIC) protected each Superior
Bank depositor up to $100,000. In an e-mail, the Obama campaign said
that as a result of the money that the Pritzker family paid to the
government, each of the depositors who exceeded the insured amount
when it failed has recovered about 69 percent of the uninsured
amounts.

It said they would continue to receive future payments.

In a statement on Mr. Obama's Web page, Ms. Pritzker described
Superior's failure as "complex," saying it was shut down by federal
regulators who concluded that the "valuation of certain assets in
Superior's financial statements . . . was overstated and as a result
the bank was not capitalized sufficiently." She said she was "proud of
how my family responded to this situation."

What happened
The Office of Thrift Supervision (OTS), a Treasury Department agency
that regulates federal savings associations, closed Superior and its
18 branch offices on July 27, 2001, naming the FDIC as conservator. At
the time, the FDIC said the bank's financial condition had "rapidly
deteriorated" and its management was "unable to resolve existing
problems.

A Feb. 7, 2002, FDIC report said the bank's failure "was directly
attributable to the bank´s board of directors and executives ignoring
sound risk management principles." The report said the bank "paid
dividends and other financial benefits without regard to the
deteriorating financial and operating condition of Superior."

"Superior Bank suffered as a result of its former high-risk business
strategy, which was focused on the generation of significant volumes
of subprime mortgage and automobile loans for securitization and sale
in the secondary market," the OTS said. "The bank also suffered from
poor lending practices, improper record keeping and accounting, and
ineffective board and management supervision."

The bank began operations in 1988 under conditions created by the
Federal Home Loan Bank Board, which made generous arrangements for the
takeover of several failed thrifts. The equal-share buyers included
the Pritzker family of Chicago, one of America's wealthiest as owners
of the Hyatt hotel chain, and the Dworman family of New York, with
interests in real estate and financial services.

The partnership operated through Coast-to-Coast Financial Corporation
(CCFC), which purchased the bank for $42.5 million with the buyers
receiving assistance from the Federal Savings and Loan Insurance Corp.
(FSLIC), which contributed a package of cash, tax credits and loan
guarantees worth $645 million, according to FDIC records.

Superior was one of the first banks in the 1990s to turn to the
emerging practice of subprime lending, where loans are targeted to
high-risk borrowers at higher interest rates. Recipients of those
loans often have loan delinquency or default histories, bankruptcies
or limited debt experience, and by the middle of this decade, they
began defaulting on their new mortgages. A dramatic rise in those
defaults and foreclosures is blamed, in part, for the recent financial
crisis.

During a campaign speech in July in Pennsylvania, Mr. Obama said the
nation's mortgage crisis "has to do with the fact that people got
suckered into loans they could not pay" — adding that the banks and
financial institutions that made the loans were "making money hand
over fist" but knew that many of the deals were "just too good to be
true."

Superior Bank's failure in his home state of Illinois has not been a
topic of Mr. Obama's campaign speeches, but he has often praised Ms.
Pritzker as a "no-nonsense, no-drama, no-ego person." He told
reporters during a flight on his campaign jet in July that he and Mrs.
Pritzker "share certain core values about how to run organizations,
and hopefully that will inform how we manage the government."

About 1,400 underinsured Superior Bank depositors ultimately were paid
the FDIC-guaranteed insured amount of $100,000 but are still owed
about $18 million. Mr. Courtney, the contractor, described as
"galling" the fact that the Pritzker family gave $30 million to the
University of Chicago's Pritzker School of Medicine a year after the
bank closed while he still awaits his own money.

"We just don't count," he said.

In search of a solution
Mr. Courtney and other "frustrated depositors" of the bank filed a
class-action lawsuit to recoup their lost money, accusing bank's
officers, directors and accountants of violating the federal Racketeer
Influenced and Corrupt Organizations Act (RICO) through the actions
they took while Superior was collapsing.

Ms. Pritzker was among the named defendants. The lawsuit said those
who controlled Superior Bank induced depositors to put money in the
bank and then "corruptly funneled it out of the bank to fraudulently
profit the owners."

A U.S. District Court judge in Chicago dismissed the RICO claims in
July 2005, and an appeal was rejected by the 7th U.S. Circuit of
Appeals in Chicago in May 2007. The case remains under appeal in the
Illinois Appellate Court. The remaining claims are that bank officials
violated the Illinois Consumer Fraud and Deceptive Business Practices
Act and the Illinois Public Accounting Act.

Chicago lawyer Clinton A. Krislov, who filed the lawsuit, said that as
time goes by, the number of people who lost their money and still need
to be repaid "is only going to decline by the number who die."

Mr. Krislov, an acknowledged Obama supporter who contributed $6,500 to
Mr. Obama's federal and state campaigns, said he was not surprised
that Ms. Pritzker was Mr. Obama's top fundraiser based on her "savvy
and ability to raise vast amounts of money." But, he said, it was
"ironic that in this case, she left the depositors and the taxpayers
holding the bag and 1,400 depositors are still just out of luck."

"These are people who, in the late 1990s when everyone else was
putting their money into the stock market or making high-risk loans,
conservatively put their money in the bank — one they thought they
could trust."

Mrs. MacKay said her aunt, Mrs. Kortas, worked as a secretary in a
popcorn factory, never married and, as a devout Catholic, had planned
to become a nun. She said she held 17 certificates of deposit in her
name as an individual owner or in trust for her nieces and nephews
totaling $209,000 and had been told by bank officials they were
properly structured and, as a result, each was covered by the FDIC
insurance.

Not so, the FDIC said after the bank was closed.

"She spent little money on herself during her lifetime and saved most
of what she earned so she could leave it to her beloved nieces and
nephews," Mrs. MacKay said.

"She was more than devastated by the bank's closing and was never the
same after it happened," she said. "She moved to a nursing home run by
Catholic nuns after her health deteriorated and that's where she
died."

Mr. Courtney went to his Hinsdale, Ill., branch the Monday after the
bank closed in 2001 and stood in line with hundreds of other concerned
depositors. He said he'll never forget overhearing a bank employee
tell "one kindly old gentleman, maybe in his 80s, that the coffee and
rolls were free but that was about all he was going to get from the
bank."

"The old man just sat down on the curb and cried. It was
heartbreaking," Mr. Courtney said. "They ran their bank like a sleazy
car lot and left us holding the bag."
http://www.washingtontimes.com/news/2008/oct/29/ex-subprime-bank-executive-finances-obama/