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Judge orders lawmaker to settle loan
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Forsyth County News

A state senator from Cumming has been ordered by a federal judge to pay more than $263,000 to the Federal Deposit Insurance Corporation.

 

In a ruling released Monday, Judge William C. O’Kelley said “the facts clearly establish that [Jack Murphy] was in default” on a loan from Silverton Bank.

 

Moreover, he said, Murphy failed to pay any of the amount owed after June 30, 2008.

 

Murphy said Tuesday he didn’t want to comment on the ruling, as his attorneys are currently in talks with the FDIC.

 

“I don’t want to do anything to jeopardize the negotiations,” Murphy said. “I’m disappointed because I thought [the attorneys] had it worked out at one point.”

 

The case dates back to 2003, when Murphy took out the loan. The Republican, who represents District 27 and chairs the Senate’s banking committee, has said he used 30,000 shares of Integrity Bank as collateral.

 

Integrity Bank, on which Murphy served as a board member, was shut down by the FDIC in August 2008.

 

Silverton Bank filed suit, contending Murphy still owed $193,187 on his loan. When Silverton failed in 2009, the FDIC took over the lawsuit.

 

According to Murphy, he took out the loans to buy Integrity stock, which held no value once the bank’s five branches were closed.

 

The judge’s ruling for Murphy to pay money owed, plus interest, is separate from the FDIC’s ongoing $70 million lawsuit against Murphy and seven other executives at Integrity Bank.

 

The FDIC has charged the group with gross negligence and breach of fiduciary duties.

 

While the case is still pending, a judge did issue a ruling to throw out the negligence portion of the suit.

 

Murphy said he also has settled a separate case involving a $75,000 loan he took out with Nexity Bank. He used 20,500 shares of Integrity Bank as collateral, but still owed nearly $49,000, including interest and late fees.

 

Murphy said he settled the case last year and is looking forward to resolving his legal issues.

 

“If I wasn’t a state senator, I’m not even sure this would be out there,” he said. “We need to get this over with so we can all just kind of move on with our lives.”

 

According to court documents in the Silverton/FDIC case, Murphy had informed the bank he disagreed with an increased interest rate and as a result would stop paying until he received a corrected invoice. He also offered to secure the loan with a piece of property.

 

In making his decision, court documents show O’Kelley reviewed correspondence between Murphy and Silverton Bank, including what appeared to be the final letter from Murphy threatening legal action of his own.

 

“I have and continue to maintain a good credit rating and advise you and the Silverton Bank that if you damage my integrity in any way, I will seek legal action, based on hard faith,” Murphy wrote. “It’s unbelievable to me that you would jeopardize the bank’s position over the interest rate adjustment.”

 

But as of June 2008, Murphy did not provide additional collateral and has not made payments to the bank.

A November 2008 letter from the bank’s counsel was sent to Murphy declaring the loan in default.

 

Murphy has previously said his legal and banking problems do not conflict with his service on the Senate’s banking committee.

 

"I am a businessman and I'm in real estate," Murphy has said. "I own about 12 or 13 properties of course, I've got loans with other banks.

 

"Everyone in real estate is going to have these problems every now and then. It's just business."