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Multi-million Dollar Settlement Secured for Bank Under Financial Institution Bond

October 24, 2011

On October 24, 2011, Anthony Twardowski and Philip Magen concluded a settlement on behalf of one of the firm’s banking clients, securing for the bank a multi-million dollar recovery from the insurance company that issued its financial institution bond.  The bond claim arose from defaulted commercial real estate acquisition and development loans for properties located in Philadelphia and at the Jersey shore.  Specifically, the bank sought coverage under the employee dishonesty insuring agreement of the bond, claiming that the former loan officer responsible for those loans withheld from the bank’s loan committee critical information regarding the underlying transactions all in furtherance of a scheme to improperly extract from the borrower a substantial kickback.  Tony handled the matter from its inception, guiding the bank through the internal investigation that first uncovered the loan officer’s improper conduct, reviewing applicable insurance policies to insure that proper and timely notice was given to insurers potentially answerable for the bank’s loss, insuring that key evidence (including damaging text messages between the loan officer and borrower) was properly preserved, reporting the matter to appropriate federal authorities and thereafter coordinating efforts in connection with the parallel civil and criminal investigations, and preparing a comprehensive proof of loss for submission to the bank’s insurer.  Asserting countless coverage defenses under the intricate provisions of the bond, the insurer ultimately declined coverage, after which Tony and Phil commenced litigation on the bank’s behalf.  As a result of their thorough legal research with respect to the myriad coverage issues and the factual record they painstakingly developed both before and after the lawsuit began, Tony and Phil were able to convince the insurer to settle, on the eve of mediation and before the bank incurred significant discovery expense, for over seventy percent of the bank’s maximum potential recovery.

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