Two depositors at bank that was crashed lay claim to funds in new suit
03/31/2010 10:00 PM
A class action lawsuit filed in federal court here in February is the latest twist in a situation that began nearly 10 years ago when a former high-stakes gambler with a literary bent helped crash a small Pilsen-based bank.
For approximately six months starting in December 2001, Adam Resnick operated a check kiting scheme that resulted in the collapse of Universal Federal Savings Bank, formerly located at 1800 S. Halsted.
With the help of bank insiders, Resnick pulled more than $10 million out of Universal and another bank, forcing the Federal Deposit Insurance Corporation to seize Universal in June 2002.
The money allowed Resnick to feed a gambling habit that took him to casinos in Las Vegas and Hammond, Ind.; he placed his wagers online and with local bookies. A 2007 book Resnick co-wrote titled Bust: How I Gambled and Lost a Fortune, Brought down a Bank — and Lived to Pay for It recounts the episode.
In 2005, Resnick and two others were indicted by federal prosecutors. Resnick later pleaded guilty to one count of wire fraud and served just less than two years in prison between 2007 and last year. He was ordered to pay the FDIC around $10.4 million in restitution. The government is still owed around $9.75 million, according to court records filed earlier this year.
The class-action suit names the FDIC and Resnick as defendants, though much of its language focuses on the federal banking agency.
It alleges that former Universal depositors haven’t been made whole for uninsured deposits in excess of $100,000 they lost following Universal’s original failure and it lays claim to money owed Resnick, some portion of which will flow to the government, as part of his whistleblower activities.
In 2006, a Washington, D.C.-based law firm sued a medical company on Resnick’s behalf. The whistleblower suit exposed a medical fraud, and, last November, resulted in a $98 million settlement for the federal government and several states. Resnick’s share for acting as a “relator” in the case makes his share nearly $2 million, according to court records.
Clint Krislov, the attorney who brought the class action suit, estimated Universal’s depositors are owed around $500,000 for uninsured deposits. And Resnick’s restitution means there’s a real possibility that Universal’s depositors, as owners of the bank, a “mutual” institution, could get funds, he said.
“My concern is the depositors of the failed bank should get their money in full, and that any restitution the FDIC recovers should go to the depositors, the certified claimants, and the depositors as owner of the bank,” Krislov said.
A spokesman for the FDIC said the agency does not comment on pending litigation.
Resnick declined to comment.
Universal held total assets of $51.6 million when the FDIC took it over in 2002, approximately $5 million of which were uninsured.
On a Web page the agency created about the Universal Bank failure, the FDIC lists four “dividend” payments it made to Universal’s claimants between July 2002 and October 2007.
The dividends represent money the FDIC gains after selling off a failed bank’s assets; the funds are distributed according to federal code. The agency spokesman said the four Universal transfers represent 99.3 percent of the failed banks uninsured assets.
Caroyln Gurland, Resnick’s lawyer in litigation connected to the 2005 indictment — she’s not representing him in Krislov’s class action suit — said her client will follow a court order in regards to making restitution.
Those payments started with more than $484,000 Resnick made prior to pleading guilty to the charges levied against him, according to a “Changed Economic Circumstances” document Gurland filed last December.
“In addition to that, he has worked to bring in additional funds that will benefit individual victims and the FDIC,” Gurland said. She has asked presiding Judge Wayne Andersen to allow Resnick to keep 20 percent of after-tax proceeds coming out of the medical fraud settlement.
Litigation connected to that request and the class-action suit is ongoing.
On March 25, Judge Anderson, who is overseeing Resnick’s restitution payments, denied a motion by unpaid Universal creditors to intervene in the case.
Counsel for the FDIC, meanwhile, has yet to respond to the class-action suit.
The class-action case also seeks to direct more than $848,000 the FDIC will gain from a bookie named Dominic Poeta to the uninsured depositors. Resnick placed bets with Poeta during his gambling run with Universal money, leading the U.S. Attorney’s office in Chicago to seek control of those funds.
Krislov said all sides are discussing the case, and he was hopeful they’d reach a settlement.