Opinion ID: 3009588
Heading Depth: 2
Heading Rank: 2

Heading: The Levine Loan

Text: John Bailey is the Executive Vice President of Crestmont. His responsibilities include underwriting commercial loans, managing a commercial loan portfolio, producing new lending business and supervising Crestmont's loan officers. Bailey had authority to approve loans of less than $500,000 if they did not directly involve the interests of Crestmont's directors but had no authority to approve loans in excess of $500,000 or loans in which Crestmont's officers or directors had an interest. Loans over $500,000 went before a Senior Loan Committee made up of Bailey, Seidman and Crestmont's President, S. Griffin McClellan (McClellan). Commercial loans in which an officer or director had an interest were prohibited at Crestmont. In December of 1990, Steven Levine (Levine) of S & N Realty approached Bailey about end-user financing for a $466,000 office condominium in FSA's Boonton project. Levine, who had been referred to Crestmont and Bailey by Zorlas, sought $375,000. On December 18, 1990, Bailey contacted Zorlas, Rappaport and Seidman about Levine's loan request and asked them how things stood on Seidman's partnership interest in FSA. All three FSA partners individually represented to Bailey that Seidman was in the process of withdrawing from the partnership and that the withdrawal would be completed shortly. Bailey Appendix (Bailey App.) at 319. Bailey memorialized this conversation and placed a memo about it in a file marked Seidman Financial Associates. Id. Rappaport testified he told Bailey no loan could be made to Levine until Seidman was out of the partnership. Assured Seidman would soon be out of FSA, Bailey decided to get a head start on the Levine loan and assigned James Little (Little), a Crestmont loan officer, the task of writing it up. Little interviewed Levine and told him the loan could be approved but no other action could be taken on it until Seidman left FSA. Little became involved with other things and gave the paperwork on the loan back to Bailey to complete. Still assured that Seidman would soon be out of FSA, Bailey did extensive work on it. Bailey prepared a Credit Summary for the Levine loan on February 21, 1991.5 On March 19, 1991, Bailey and Little approved the loan and issued a commitment letter to Levine.6 5 . In the Credit Summary form there is a space headed Bank Officers and Directors Interest. Bailey says he thought this heading referred to the officers and directors of the Levine partnership, not FSA, the developer. Bailey also listed the applicant as [a] N.J. General Partnership, the ownership of which is 100% Steven K. Levine and Ned Levine. Bailey App. at 321. Clarence Hartwick, a twenty-seven year veteran in banking and an executive at First Fidelity Bank in New Jersey, corroborated Bailey's understanding at a hearing before an OTS ALJ. He testified: That line refers to the borrower. Is the borrower an officer or director of the bank, it's as simple as that. Id. at 304. Bailey entered the word none on the line calling for disclosure of Bank Officers and Directors Interest. Id. at 321. Other underwriting documents included with the Credit Summary clearly disclosed FSA's interest. 6 . The commitment was later modified and reissued on May 10, 1991. Unknown to Bailey, Levine had already entered into a Contract of Sale with FSA on or about May 10, 1991. Seidman did not formally withdraw from FSA until June 1, 1991. Questioned about what would have happened if Seidman had failed to withdraw from a similar transaction, Crestmont's President, McClellan, testified, We would not have closed the loan. It was clearly Levine did not sign the commitment letter until May 30, 1991, when Bailey was given a check for $2,000 in exchange for the commitment.7