The shareholders of Sonoma Valley Bank filed a class action lawsuit Wednesday laying the primary blame for its collapse on its former president and chief executive officer, Sean Cutting.

The lawsuit, which also names the bank's six corporate directors and chief financial officer, accuses them of mismanaging more than $40 million in loans.

It claims Cutting was "most directly responsible for the imprudent loan activity that destroyed the bank," according to the complaint.

Cutting did not return calls seeking comment, and bank directors reached Wednesday declined comment.

The class action lawsuit, filed in Sonoma County Superior Court, will cover virtually anyone who owned shares as of Aug. 25, 2010, except those named as defendants in the case, said George Donaldson, the Berkeley attorney representing shareholders.

Newton Dal Poggetto, a Sonoma attorney, is the lead plaintiff on the case.

"There are a lot of shareholders who feel they've been wronged," he said.

Shareholders, mostly Sonoma Valley residents, saw the value of their stock fall from $31 a share in the autumn of 2007 to less than a penny after the bank's seizure last summer. The three-year slide wiped out $71 million of wealth.

The federal government is estimated to have lost at least $20 million due to the closure.

The lawsuit blames the bank's collapse, in large part, on its decision to approve loans totalling more than $40 million to companies and business partners of Bijan Madjlessi, a Marin County developer. About $35 million of those loans were never repaid.

Madjlessi was arrested this month by state regulators for alleged insurance fraud stemming from a fire at one of his developments in Reno.

The lawsuit blames the bank's executives and directors for allowing the alleged "massive, concentrated loans made to Madjlessi."

The lawsuit also calls out the bank's four-member audit committee, which was responsible for reviewing the bank's financial statements. The bank was forced to drastically revise its financial statements after government regulators reviewed its accounting in early 2010.

In essence, regulators determined the bank's net worth, which is called shareholder equity, was only half of what bank executives had claimed in their financial filings. Literally overnight, the bank had to revise its shareholder equity from $37.7 million down to $19.2 million in February 2010.

This precipitous drop in capital, which is a key measurement of a bank's health, resulted in the government taking steps to close it.

"The audit committee clearly failed to discharge its responsibilities and, in so doing, acted negligently," the lawsuit alleges.