Ex-BoS receiver Fennell, others sued

The Bank of Saipan’s biggest single depositor, the Marianas Public Lands Authority, sued former bank receiver Randall Fennell and his attorneys yesterday, intervening in the civil case that the financial institution had initiated last year against Fennell and company.

The MPLA accused Fennell, lawyer Richard Pierce and his previous firm—White, Pierce, Mailman & Nutting—as well as lawyer David Axelrod and his law firm Schwabe, Williamson & Wyatt, of committing fraud to destroy the bank instead of rehabilitating it. The agency and its board said Fennell’s actions as receiver had frozen its bank deposits, resulting in the impairment of homestead development. It asked the court for an award of still unspecified monetary damages.

“Instead of trying to protect the assets of the bank, he and his attorneys abused their positions of trust by forming a secret and unlawful scheme to destroy the bank to settle old scores with the bank’s directors and majority shareholders. Defendants publicly disparaged the bank when it was solvent, to the detriment of the public, the bank, its employees, shareholders, and depositors, including MPLA,” MPLA’s attorneys, Matthew Gregory and Ramon Quichocho, said.

The MPLA attorneys also disclosed that Axelrod and the Schwabe firm made an unlawful cash payment of $11,977.40 to the former law clerk of CNMI Supreme Court Associate Justice Alexandro Castro, Diane K. Bergeron, to solicit documents that Fennell would use to disqualify the magistrate from court proceedings related to the receivership as part of an alleged smear campaign.

Before the bank’s temporary closure in April 2002, the MPLA had seven certificates of deposits with a total face value of over $8.13 million deposited with BoS. The MPLA attorneys said two of those CDs matured and were redeemed on April 29, 2002, but were not paid out by the bank, which was closed the following day and placed under receivership.

The MPLA attorneys said Fennell refused to cooperate with the agency and its board regarding the status or security of the deposits. They said Fennell even failed to serve the MPLA with court documents even though it had notified the court of its appearance in the receivership case.

“On May 8, 2002, Fennell filed his report with the court, which placed a total freeze on all government deposits only, including all of the board and MPLA’s deposits,” the MPLA attorneys said.

The MPLA attorneys also accused Fennell of engaging in improper exclusive communications with the court, which deprived the agency of due process in the receivership proceedings. They said Fennell deliberately made exclusive communications with the court to advance his agenda of liquidating the bank’s assets.

“Fennell reopened the bank during his tenure, without any rehabilitation plan in place, allowing non-government depositors to withdraw a large percentage of the bank’s deposits and precipitating a ‘run’ on the bank, seriously eroding the bank’s financial status and endangering its ability to become rehabilitated,” they said.

Fennell’s plan to liquidate the bank’s assets delayed the rehabilitation that was eventually carried out by his successor, Antonio Muna, under a court-approved plan, the MPLA attorneys said. The bank and the MPLA agreed in 2004 to allow restricted withdrawals by the agency. They said that the MPLA would have been able to utilize its funds at a much earlier date had Fennell worked on rehabilitating the bank.

In a 27-page complaint, the MPLA attorneys also enumerated numerous conducts of fraud allegedly committed by Fennell and the other defendants, including the concealment of conflicts of interests, the submission of “doctored” consultant reports, improper exclusive contacts with the court, and engaging in a smear campaign to ruin the bank and certain members of the judiciary.

“To buttress their claims that the bank has ‘failed,’ had made ‘bad loans’ and was incapable of salvation, defendants failed to collect loans, publicly disparaged the bank individually, and through the media consultant they secretly hired without court authorization, and refused to timely and aggressively pursue claims against the criminals who were responsible for the bank being in receivership,” the MPLA attorneys said.

The MPLA’s suit came about even as the CNMI government declared that it wanted the bank to stop litigating against Fennell, since the proceedings might be costly for the bank, especially if the former receiver prevails in a possible counterclaim.

Besides the MPLA, other government agencies have huge deposits with the bank. The government has approximately over $15 million in deposits, including those of the MPLA. The Northern Mariana Islands Retirement Fund has some $5.6 million, while the Commonwealth Development Authority controls the rest of the government deposits.