Lawsuit Fears Push Up Costs for Risky Banks

The FDIC aims to recover losses from leaders of failed institutions

On Nov. 1, the Federal Deposit Insurance Corp. sued 11 former officers and board members of Heritage Community Bank, a Glenwood (Ill.) lender closed by state regulators last year. The complaint alleges that the bank's leaders ignored losses on risky commercial real estate loans while paying out millions of dollars in dividends and bonuses. The lawsuit, seeking at least $20 million, foreshadows a likely wave of litigation against the people who ran the 314 banks that have failed since the start of 2008. The FDIC has authorized lawsuits to recover more than $2 billion from scores of former bank officials.

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