Superior Bank of Chicago

The Superior Bank FSB was a Hinsdale, Illinois-based Savings and loan association that collapsed in July of 2001 [http://www.ots.treas.gov/docs/7/77151.html OTS Closes Superior Bank FSB; Hinsdale, Ill. Thrift is Insolvent] ] some with $2.3b in assets.Joseph Weber and Lorraine Woellert, [http://www.businessweek.com/magazine/content/01_37/b3748102.htm The Pritzkers' Empire Trembles] , "Business Week" September 10, 2001]

Synopsis

Superior opened in 1988 under conditions created by the Federal Home Loan Bank Board, which made generous arrangements for the takeover of several failed thrifts. The Pritzkers and Dworman bought the failed Lyons Federal for the relatively modest price of $42.5 million, with each using a shell corporation to control half of Coast-to-Coast Financial Corporation (CCFC), a holding company created to own Superior. The bank was a 50-50 partnership between the Pritzker's jointly (the elder Jay, Penny and Thomas) and real estate investor Alvin Dworman, who ran Superior from his New York office after Pritzker's death in 1997.

July 2001 collapse

According to a press release from the Office of Thrift Supervision,

George Kaufman, a finance professor at Loyola University Chicago called Superior's failure "a tale of gross mismanagement," adding that " [Superior] was engaged in relatively unethical practices, fancy-footwork accounting, playing it very close to the edge."Shane Tritsch, [http://www.chicagomag.com/Chicago-Magazine/December-2002/Tremors-in-the-Empire/ Tremors in the Empire] , "Chicago Magazine" December 2002]

Kaufman says many share in the blame for the mess-the bank's managers, directors, and auditors, as well as banking regulators-but he also wonders how the Pritzkers, as co-owners, could have allowed it to happen. "One of the great mysteries to me is what the Pritzkers were up to, why they took these chances," he said. "It makes no sense given their wealth and visibility."

Settlement by the Pritzkers

In December of 2001, the Pritzkers agreed to pay a record $460 million to the federal government to avoid being punished for the failure of Superior Bank FSB. David Barboza, [http://query.nytimes.com/gst/fullpage.html?res=9404E5D6163FF932A25751C1A9679C8B63 Hyatt Hotel Family Will Pay $460 Million in S.& L. Case] , "New York Times" December 11, 2001]

RICO lawsuit

In 2002 uninsured depositors filed federal class-action charges under the RICO Act against one-time board chairwoman Penny Pritzker, her cousin Thomas Pritzker, Dworman, other bank principals and Ernst & Young. Plaintiffs’ attorney Clint Krislov claimed that those who controlled Superior induced depositors to put money in the bank, “corruptly” funneling money out of the bank to “fraudulently” profit the owners.David Mobert, [http://www.inthesetimes.com/article/671/ Breaking the Bank] , "In These Times" November 8, 2002] The lawsuit, "Courtney v. Hallerin" was an initially filed under a district court which dismissed the claims; [http://bulk.resource.org/courts.gov/c/F3/485/485.F3d.942.05-3651.05-3642.05-3500.05-1244.html John W. Courtney et al v. Neal T. Halleren et al (485 F.3d 942)] the appeal was argued before the 7th Circuit of the United States Court of Appeals on September 25, 2006. In her May 7, 2007 opinion, Judge Wood affirmed the lower court's decision.

External links

* [http://www.fdic.gov/bank/individual/failed/superior.html Failed Bank Information: Superior Bank, FSB, Hinsdale, IL] from the FDIC

References