Bank South says a $5 million lawsuit accusing the bank of financing and profiting by a foreclosure fraud scheme is an example of "groundless, frivolous and harassing litigation by irresponsible attorneys."
The bank was sued Tuesday in Fulton County State Court by 14 poor, black families who claim they were robbed of their homes by Brown Realty Co. of Decatur. The families claim Bank South loaned money to Brown Realty, profited from interest paid on the loans and knew or should have known of the company's activities.
The bank, in a written statement Wednesday, responded that it had no knowledge of any fraud and had no contact with the families.
"It is inconceivable that a complaint would be filed accusing the bank of fraud, theft and deception when the bank did not have any dealings or transactions with the people making the claim and when the bank had no knowledge at all of the claimed fraud," said the statement from Bolling P. Spalding, Bank South vice president for public affairs and communications.
Pending lawsuits against Brown Realty claim the Browns pretended to offer loans to families to help them avoid foreclosure, but instead the homeowners signed over the houses to the Browns. The suits claim the Browns then used the houses as collateral for second mortgages from Bank South.
Although Bank South said it had no knowledge of any fraud, the lawsuit is based in part on the state Racketeering Influenced and Corrupt Organizations law, which provides a civil remedy for anyone injured by a scheme of criminal activity. The law also allows recovery of damages from anyone who financed or profited from such a scheme.
The suit also was based on a 1975 Georgia Supreme Court decision that says lenders have an obligation to investigate before lending money on any property when someone who has sold the property retains possession of it. The bank's statement did not respond directly to either legal point, and Mr. Spalding said he was advised by the bank's attorneys not to answer questions on those subjects.Go to the next article or back to the Color of Money index or Power Reporting
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