Time is running out for Jack Murphy to respond to a FDIC lawsuit charging him and seven other executives at failed Integrity Bank for gross negligence and breach of fiduciary duties.
But in the meantime, Murphy, the District 27 state senator from Cumming, has also been dealing with two other lawsuits for reportedly failing to repay bank loans.
“This economic situation has taken its toll on a lot of individuals,” said Murphy, who chairs the Senate Banking and Financial Institutions Committee.
“This is about business dealings that have been in negotiations for two years through my attorneys and settlements are being negotiated as we speak.”
The two lawsuits are nowhere near the size of the $70 million Integrity Bank matter, but both target Murphy individually for his failure to pay back loans.
One of the lawsuits, filed by Nexity Bank, claims that as of October 2009, Murphy owed $48,708, including interest and late fees, on a $75,000 loan taken out in July 2007.
Collateral for the loan was 20,500 shares of Integrity Bank, which failed in August 2008.
Murphy also used Integrity Bank shares as collateral for his $247,650 loan from Silverton Bank, the other institution that has filed suit for failed payments.
Like the Nexity arrangement, the Silverton Bank collateral of 30,000 shares of Integrity Bank hold no value.
The Silverton Bank suit contends Murphy still owes $193,187.
It also seeks to collect an additional $15.71 for every unpaid day since Dec. 31, 2008.
Since Silverton Bank failed in May 2009, the suit has been taken over by the FDIC.
Murphy said he used the loans to buy Integrity stock.
Attorney Tom Knox, a former local state representative, is handling Murphy’s case.
“I think that he absolutely has meritorious defenses in the case,” Knox said. “I’m working with attorneys from both of these entities.”
Knox hopes both cases can be resolved by year’s end, though he said the banks are unfairly targeting Murphy to make an example of him.
“That’s a tactic that federal agencies like the FDIC use,” he said. “They like to go after public figures. That gets the news ... to spread around and is supposed to scare anyone else in a like situation.”
Murphy said his situation is not uncommon from others in his industry. It’s also a business standard to have multiple loans for various investments, he said.
“I am a businessman and I’m in real estate,” Murphy 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.”
Murphy said the three lawsuits are a personal issue that do not affect his service on the senate Banking and Financial Institutions Committee.
“You have lawyers serving on the judiciary committee,” he said. “If they get a lawsuit from a bank, are they supposed to recuse themselves from serving on that committee?
“The banking committee has very little influence on what goes on in the banking industry.”
Knox agreed, saying the suit doesn’t conflict with Murphy’s committee service.
“It doesn’t have anything to do with banking regulation in my book,” he said. “It’s strictly a business decision.”
Murphy also touched on the $70 million FDIC suit, which maintains the bank violated rules, made false reports and allowed loans to borrowers known to be poor credit risks.
The bank also reportedly failed to disclose the true condition of assets and did not adhere to policies outlined in warnings from federal and state banking authorities and regulators, among other complaints.
Murphy said the FDIC’s claims are untrue.
“Our answer has not even been filed,” he said. “But when it is filed, I’m sure that people will see that we will be vindicated in that lawsuit.”