Magazine article American Banker

PNC Mired in Realty Fraud Suit against Pa. Bank It Acquired

Magazine article American Banker

PNC Mired in Realty Fraud Suit against Pa. Bank It Acquired

Article excerpt

A recent bank acquisition has landed PNC Bank Corp. in a tangle of litigation over a failed real estate venture.

A federal district judge in Newark last week declined to accept PNC's motion to dismiss a lawsuit filed originally against Wilkes-Barre, Pa.-based First Eastern Bank, which PNC acquired in June.

The suit claims that First Eastern, now PNC, violated various provisions of the Racketeer Influenced and Corrupt Organizations Act in regard to its financing of a real estate development known as Valley of Lakes, near Hazelton, Pa.

Any suit based on RICO claims carries the risk of treble damages. Roger S. Antao, the New York-based attorney for the 16 plaintiffs, said he hasn't proposed a specific figure for a damages claim but the amount could be "substantial."

Jonathan Williams, a PNC spokesman, said Monday that he could provide no information about the impact the litigation might have on the Pittsburgh-based company, which has $64 billion in assets.

"We intend to defend against this case vigorously, and we deny the allegations as to First Eastern's conduct," the spokesman added.

The lawsuit, which is still seeking certification for class action status, stems from the collapse of the 4,000-acre Valley of Lakes development, to which First Eastern had lent more than $20 million.

The first developer, Jack Halprin of High Vista Corp., received a jail sentence on land-sale and mail-fraud charges and served six months in prison. The second developer, Frank Cedrone of CBG Ltd., who bought the property at foreclosure in 1986, filed for bankruptcy in 1992.

The complaint alleges that thousands of people in Pennsylvania and neighboring states lost money. …

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