Shareholders of Sonoma Valley Bank filed an insurance claim seeking to recover up to $20 million of equity wiped out when the bank collapsed last August.
The shareholders claim some of the bank's officers and directors were negligent when they made several large loans to a Marin County developer and his business partners, whose companies have now defaulted on at least $35 million in loans from the Sonoma bank. The group plans to file a class action lawsuit either Wednesday or Thursday in Sonoma County Superior Court.
The insurance policy provides up to $20 million to protect the bank's leadership from such a lawsuit, but the policy was set to expire on July 1 unless investors filed a claim first, said Newton Dal Poggetto, a shareholder and Sonoma attorney who filed the claim and is the lead plaintiff on the expected lawsuit.
The claim was sent to the bank's insurer, Progressive Casualty Insurance Co., and the bank's board of directors this month.
Sean Cutting, the bank's former president and chief executive officer, could not be reached for comment Tuesday. An employee at Rabobank in Sonoma, where Cutting now works as senior relationship manager, said he was out on a four-week medical leave.
Steve Page, a bank board member and also president and general manager of Infineon Raceway, said he received a copy of the insurance claim but declined further comment.
The insurance claim contends at least some bank officers and directors were negligent when they loaned money to projects managed by developer Bijan Madjlessi.
“I think they were horribly negligent in lending this guy a dime,” Dal Poggetto said.
Madjlessi helped arrange more than $40 million in loans from Sonoma Valley Bank, with at least $35 million of those loans defaulting, according to public records.
The bank's loan losses ultimately triggered bank regulators to close it, plunging the bank's stock price to 3/10ths of a penny per share.
“I'm out about $600,000 to $700,000,” said Erland Stenberg, a Santa Rosa accountant who owned about 20,000 shares of the publicly traded bank. “I would like to get some money back.”
It is unclear how much, if any, money would be left for shareholders if they win their claim.
The federal government is estimated to have lost more than $20 million in the bank's collapse, which includes the $8.7 million in bank bailout money Sonoma Valley Bank received and the estimated $14 million loss to the Federal Deposit Insurance Corporation.
The FDIC is still investigating Sonoma Valley Bank to determine if it should file its own civil lawsuit against any of the bank's directors or officers, said Greg Hernandez, a spokesman for the agency. On average, that process usually takes 18 months, he said.