Magazine article American Banker

FDIC Suit Claims Failed Chicago Bank Footed Luxury Wedding

Magazine article American Banker

FDIC Suit Claims Failed Chicago Bank Footed Luxury Wedding

Article excerpt

Byline: Robert Barba

A year before Mutual Bank in Harvey, Ill., failed in 2009, management doled out $250,000 for what was described as a bank function. Federal regulators now say that function was an over-the-top wedding for the top brass' son, complete with a Rolls-Royce entrance.

The lavish affair was one of several eyebrow-raising events laid out in a 47-page complaint filed last week by the Federal Deposit Insurance Corp. in the U.S. District Court for the Northern District of Illinois.

The FDIC is seeking $127 million from nine directors and officers, including Arun Veluchamy, a director and the groom in the July 2008 wedding held at the Chicago Sheraton. Others include directors Anu Veluchamy, Steven Lakner, Ronald Tucek, Patrick McCarthy and Paul Pappageorge. The suit also names former chief credit officer, Thomas Pacocha, former senior vice president Richard Barth and former general counsel, James Regas.

The bank's chairman, Pethinaidu Veluchamy, and his wife and fellow director, Parameswari Veluchamy, were listed as merely interested parties in the suit, rather than defendants, because they have filed for bankruptcy protection. The suit says their bankruptcy precludes them from being named as defendants unless the stay is modified or lifted. A call to a lawyer representing the directors was not returned, nor was one to Regas' office.

The FDIC lists 11 counts against the defendants, ranging from gross negligence to breach of fiduciary duty.

The $1.6 billion-asset bank failed in July 2009 and its failure is on track to cost the Deposit Insurance Fund $775 million.

The wedding was part of a $1.1 million claim for wasted corporate assets. Other abuses, the FDIC claims, include $495,000 paid to Mahajan to cover his wife's legal fees in a Medicaid fraud case, $250,000 of home renovations and a $300,000 board meeting in Monte Carlo. …

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