JC Flowers Owned Bank that was Penalized by FinCEN for Money
Laundering
ANDORRA, May 3, 2016 /PRNewswire/ -- J.C. Flowers
& Co., the company selected by the Government of Andorra to take over the assets of Banca
Privada d'Andorra ("BPA")
expropriated from the Ramon and Higini Cierco, has a history with
FinCEN. The firm bought a small bank in the United States that was itself penalized by
FinCEN for undertaking huge transactions with customers in
Mexico and the Dominican Republic.
Saddle River Valley Bank (SRVB)
was a small, two-branch New Jersey
bank that was struggling after the financial crisis. J.C. Flowers & Co. was searching for a bank
to invest in as part of a strategy to acquire more failed banks
from the Federal Deposit Insurance Corp. SRVB opened up a
wire transfer service with Latin American countries, and under
J.C. Flower's leadership from
2009-2011, the bank handled $1.5
billion in financial transactions with customers in
Mexico and the Dominican Republic, while the bank managed
only $120 million in assets
domestically. Unlike BPA, Saddle River Valley Bank was a tiny
domestic operation whose involvement in Latin American money
laundering dwarfed any legitimate business operations.
Saddle River's Latin American
transaction business caught the attention of FinCEN, which opened
up an investigation into the bank in 2011. J.C. Flowers hurriedly sold its shares soon
after, and the bank had to accept a buyout deal with Union Center
National Bank, which greatly undervalued SRVB and cost the
remaining minority shareholders a great deal of money.
In 2013, SRVB settled with FinCEN and other authorities for
$8.2 million over charges that
included failures in recording keeping, reporting, and a failure to
have an effective anti-money laundering program in place.
J.C. Flowers & Co. claims it did
not know about SRVB's wiring services, despite spending 9 months
looking into SRVB's books and business before deciding to buy
in. And how could a controlling shareholder miss the fact
that the bank had so few assets and its principal business appeared
to be handling transactions with Latin American customers worth
nearly fifteen times the assets of the bank?
Six local, minority shareholders who lost money decided to sue
SRVB, J.C. Flowers & Co., and
J.C. Flowers & Co.'s affiliated
SRV Holdings in late 2012 for failing to uphold their promises of
revamping SRVB. Court records were sealed by request of all
parties, so specific plaintiffs and defendants are unknown besides
ex-Mayor Conrad Caruso, who was the
initiator of the suit. The case was eventually settled for
$1.2 million.
So now we see the hypocrisy of AREB, which claims that
J.C. Flowers "achieves every single
objective pursued by the Resolution Plan for Banca Privada
d'Andorra (BPA)." What
objectives are those? Finding a purchaser that owned a bank
that was doing massive money laundering and was penalized by
FinCEN? Finding a purchaser that claims it could not discover
$1.5 billion of tainted transactions
in a bank with $120 million in
assets? What can AREB expect J.C.
Flowers to bring to Andorra, the same care and ethics that it
showed in the United States? Or is this just an attempt to
sell to anyone to sweep Andorra's
massive incompetence and lack of transparency under the carpet?
Timeline:
2006 - Saddle River Valley Bank is formed by Conrad Caruso, who wanted to create an entity
that offered investment and lending services to local
businessmen.
2007-2008 - SRVB has mediocre performance up until the
financial crisis struck. The Bank began struggling to stay
afloat.
2009 - For the first nine months of 2009, Saddle River
Valley Bank was being courted by JC Flowers & Co. JC Flowers
& Co. spent months looking into the Bank's books before coming
to a deal for majority ownership.
During this time, the bank starts offering international wire
transfers for a fee.
A deal was reached for around $7
million in October 2009 from
JC Flowers & Co. and its affiliate, SRV Holdings LLC.
2010 - SRV Holdings officially acquires enough shares to
take control of the bank.
2011 - Saddle River Valley Bank gets the attention of
regulators, who ordered the lender to stop violating anti-money
laundering laws and to set up an effective program to measure
account activity.
Saddle River Valley Bank did not
comply with the standards, and the Office of the Comptroller of the
Currency opens an investigation.
2012 - The bank is struggling again, and agrees to sell
the majority of its assets and deposits to Union Center National
Bank for $9 million, a highly
undervalued sale.
Six minority shareholders, including original founder
Conrad Caruso, sue the Bank, JC
Flowers & Co., and the bank's board of directors for leading
the bank to ruin.
2013 - Saddle River Valley Bank settles with FinCEN and
the OCC for $8.2 million.
Flowers had sold their shares of the bank in 2012, but the
investigated actions took place from 2009 to 2011, during the time
when JC Flowers & Co. was managing the bank. JC Flowers &
Co. denies any knowledge of the events and no official charges were
filed.
2014 - The minority shareholders settle for $1.2 million.