More than two years after the collapse of Sonoma Valley Bank, its president and a loan officer have been banned from the banking industry by federal regulators who found that each man had engaged in "a pattern of misconduct" that damaged the now-defunct bank.
The Federal Deposit Insurance Corporation ordered the bans for Sean Cutting, the former bank's president and CEO, and loan officer Brian Melland. It imposed a $10,000 fine on Cutting and a $2,500 fine on Melland.
Both men were accused of "reckless, unsafe or unsound banking practices" by the FDIC, which released its decision Friday. In addition, Melland allegedly benefited financially from his actions, according to the order.
The FDIC orders didn't specify the violations and "breaches of fiduciary duty" the two men allegedly committed at the Sonoma bank, which was taken over by regulators in August 2010.
Shareholders and other critics have maintained that Sonoma Valley got into trouble when bank officials made more than $40 million in risky real estate loans to a Marin County developer and his associates.
Despite silence on the specifics, the two federal orders concluded the conduct by Cutting and Melland demonstrated an "unfitness to serve" in the banking industry.
A spokeswoman for the FDIC declined further comment on the orders.
A former bank shareholder and an attorney who represents investors suing the bank both expressed support for the federal action.
"It was sort of a pleasant surprise to us, to see that the FDIC said something and did something," said Newton Dal Poggetto, a Sonoma attorney and a shareholder involved in a lawsuit against the bank's top officials.
Melland declined comment and Cutting didn't return calls for comment. Cutting's attorney, Neal Stephens of Palo Alto, said his client had voluntarily agreed to accept the order but hadn't acknowledged any impropriety.
"Mr. Cutting has neither admitted nor denied any of the issues in the FDIC order," Stephens said Tuesday. He declined further comment.
Sonoma Valley Bank was the only Sonoma County bank to collapse in the economic downturn. Its three branches and most of its assets were purchased by San Rafael-based Westamerica Bank.
The depositor's insured accounts were protected, but the shareholders maintained they lost roughly $70 million in the collapse. The federal government was estimated to have lost at least $20 million.
After the takeover, bank officials blamed the real estate downturn for their troubled loans. Even so, they maintained the bank was financially stable and that regulators didn't have to take it into receivership.
However, a year later shareholders filed two lawsuits, each one blaming Cutting and other officials for imprudent loans that destroyed the bank.
The two suits, which since have been combined, fault bank officials for making so many loans to Marin County developer Bijan Madjilessi and associates. About $35 million of those loans had not been repaid a year after the bank was seized by regulators.
The banking employment bans for Cutting and Melland have no expiration date. Ending the bans would require a new public order by the FDIC.
Both men went on to work for other banks after the Sonoma Valley collapse. But a Rabobank spokesman this week said it no longer employs Cutting and a spokeswoman for Sonoma Bank in Santa Rosa said Melland left the bank in August 2011.