The "elevating practices" image has been used before in Crabgrass reporting about that banking chain, [see reported ownership detail below to avoid confusion], see here, and here, for prior Crabgrass info on Community National Bank, North Branch.
First, Strib today online, reports, as excerpted:
$2 million building cost Lino Lakes VFW its charter
Charges, questions surround vacant building.
By JEAN HOPFENSPERGER, Star Tribune
Last update: February 9, 2009 - 11:08 PM
Five years ago the VFW in Lino Lakes had a mortgage-free building, property appraised at more than $2 million and plans to construct a new building to host wedding receptions And other events in his fast-growing community.
Today, the spanking new VFW building stands empty, foreclosed by the bank. A former post member is facing criminal charges in connection with its construction. And the 40-year-old VFW post is bankrupt and stripped of its charter.
The story begins almost a decade ago, when Circle-Lex VFW Post 6583 -- a veterans' club known for its chicken dinners, Friday Lent fish fries and generous charitable giving -- decided to expand in an attempt to boost its earnings. Carpenter, post commander during the 1990s, said "everything was set'' to build a roughly $800,000 addition to the VFW for a new dance hall and other improvements.
The project eventually morphed into something bigger.
Tom Rachel, an investigator for the Anoka County attorney's office, questioned the loan agreement. First, VFW bylaws require the commander, quartermaster and two trustees to sign legal documents, said Rachel, who looked into the project at the request of the VFW. Second, the post was about to be bulldozed, so no revenue would be coming in.
"Where was the VFW supposed to come up with $12,000-a-month payments?'' Rachel asked. "That's why it didn't look proper. The bank really had no risk because if the VFW defaulted, they'd get the building and the property it was on. Plus their other property. And that's eventually what happened.''
Officials at the bank would not comment for this story.
Southridge Construction, then based in Eden Prairie, was awarded the project contract, even though it was not bonded, and six companies offered lower bids, a county investigation showed. But the owner did know VFW member Gerald (Jerry) Russell Peterson of Roseville, reports said.
Peterson, in turn, ran a company that sold steel frames for buildings, and the new VFW became one of his clients.
During the months ahead, problems with the steel frame delivered to the site delayed construction and cranked up costs, a county investigation showed. There were more than 40 construction change orders by the time the project was finished. Meanwhile, more than a dozen subcontractors were not being paid for their work, so the post wound up with $528,000 in mechanic's liens against the VFW's property for unpaid labor or materials, according to the VFW's bankruptcy attorney.
Soon the goal of getting a new dance hall had a price tag of more than $2 million.
The VFW finally reopened in its spacious new building on Lake Drive in 2006, with the new dance hall, dining room and bar. But its cash-flow still couldn't meet the $12,000 loan payments. It declared bankruptcy by the end of the year, and Community National Bank foreclosed on the property in 2007. A former subcontractor purchased the property for $1.5 million in 2008. The new furniture and appliances -- even the sinks -- were stripped from the building and sold.
Peterson, the steel frame supplier, blames the VFW membership for its problems. He said infighting and incompetence among the VFW members is the real cause of the mess.
Peterson was charged in November with tax-related felonies in Ramsey County in connection with the project. Because of that, he did not want to comment further. Felony theft charges against him for failure to pay two subcontractors were dropped by Anoka County in October. It could not be proved that one of the subcontractors actually had a contract with Peterson, and Community National Bank resolved its civil lawsuit with the other one, according to court files.
[VFW members] want to know more about loan practices at Community National Bank, whose branch bank in Ramsey is the subject of a 2007 federal investigation for bank fraud in connection with the ill-fated Ramsey Town Center. Several bank officials now under federal investigation had worked at the Lino Lakes bank, according to court documents.
The veterans also want to know why Southridge Construction, which is no longer in business, overspent its original bid by so much.
"It's absolutely a nightmare,'' added Rachel. "Was this by design? There's no way to say that for sure. You need to have proof beyond reasonable doubt. But there are a lot of unanswered questions.''
Jean Hopfensperger • 651-298-1553
Three thoughts -
First, while "Peterson" is a common Minnesota name, there was a "Peterson" who was an officer at the North Branch outlet which financed Bruce Nedegaard and his Ramsey Town Center, LLC, venture with the remaining property in foreclosure by the banks that participated in Community National Bank's syndication of the Nedegaard financing to spread the risk. There is an Anoka County lawsuit pending, and the foreclosure amount is $35 million, probably well more than the remaining Town Center land is worth. My understanding, which might be incorrect, is that there was an exclusionary power created by Nedegaard and his LLC in favor of Community National, so that no other bank could open in Town Center, and that Jim Deal [or PSD, LLC] acquired that power about the time Martinson left the Bank to work for Deal [or his LLC], and that is the cause for delay and litigation in Bank of Elk River opening a branch in the Coborn's store, in Ramsey Town Center. I wish they would get their act together, the pack of them, so we could have a convenient Bank of Elk River branch there, where we in Ramsey shop.
The second thought - There's an error in the Strib item, not important to the main story, in that the Ramsey Town Center financing was through the North Branch office of Community National Bank - while the operation has no branch in Ramsey.
The third thought - How is the situation further complicated due to a bank acqusition, per the below excerpted East Central Minnesota Post Review story by Patrick Tepoorten, [with that paper being part of the ECM community newspaper chain]?
I believe from context the story was reported around Sept. 5, 2008, and have an email in to reporter Tepoorten for confirmation. He reports:
Community National Bank (CNB), the North Branch financial institution that has been besieged by legal problems for more than a year, has been acquired by Peoples National Bank (PNB) of Mora [... according to] CNB interim president David Cleveland in a press release issued by PNB.
PNB currently has locations in Aitkin, Brainerd, Crosby, and Mora, and the acquisition of CNB - its first such acquisition since 1995 - will spread offices to North Branch, Lino Lakes, and Vadnais Heights.
Community National Bank was thrust into the spotlight when federal agents served a search warrant there in June of 2007.
It was later revealed that CNB and at least one officer, William Sandison, was under federal investigation for bank fraud in regard to the bank’s role in a failed Ramsey development called Ramsey Town Center.
Also revealed was a host of civil suits against CNB and former officers William, Ross, and Curtis Sandison, Jerome Peterson, and CNB subsidiaries Pentagon Credit and Powerhouse Title.
In the civil suit, brought by several branches of Minnwest Bank, it is alleged that pertinent facts surrounding a $7 million loan participation agreement between CNB and Minnwest were not disclosed. Included as non-disclosures was developer Bruce Nedegaard’s legal difficulties - a 2004 guilty plea for bank fraud - and a litany of issues with the development and other financial dealings.
Another bank, Northeast Bank, filed its own civil lawsuit against CNB and officers, Pentagon, and Powerhouse, earlier this spring, over a $35 million loan.
In September of last year, the Office of the Comptroller of the Currency issued a consent order calling for what amounted to a complete overhaul of the bank’s business practices. It was relatively shortly thereafter that CNB hired Cleveland.
It was reported in Minneapolis/St. Paul business journal this spring that CNB had “shrunk” for nine consecutive quarters, and had finished 2007 with a $723,000 loss.
According to the civil attorney for CNB’s former officers Mark Larsen, the bank itself and its current officers are not a target in the federal investigation, which is ongoing.
The bank is a defendant in civil lawsuits but it is unclear at this time to what degree the bank would be responsible were any penalties to be issued. Neither PNB Chairman of the Board Jon Gorman or Cleveland could be reached for comment as of Friday afternoon (Sept. 5).
Larsen, who said civil matters concerning CNB could take years to iron out, maintains that neither the bank or it’s former officers committed any wrongdoing.
The acquisition of CNB awaits approval of banking regulators, which is expected yet this year. [approval, presumably by now, attained]
UPDATE AND CLARIFICATION: PNB's Gorman commented Friday regarding the acquisition, saying it involves only the North Branch office. The Lino Lakes and Vadnais Heights branches of CNB will continue to be owned and operated by CNB. Regarding possible civil penalties against CNB that PNB might be subject to as a result of the acquisition, Gorman said, "We've taken every precaution to prevent that."
With the troubled North Branch outlet thus reportedly severed from the [now] reportedly troubled Lino Lakes outlet, questions of what common leadership exists where are cloudied.
Also, you have to wonder in times of bank credit crisis, where writing down a bank's asset portfolio can lead to inadequate capitalization, whether banks in general or in particular are squeezing their good and solvent long-term credit customers in order to raise cash flow, because in these times changing bank credit relationships and standing to elsewhere is most difficult due to the generally severe global "credit crunch."
Whether it's happening or not is speculative, without actual evidence, but the potential for such extreme abuse is there, given the difficulty one wanting to change banking relationships might now experience, if needing sound and ongoing credit to operate a business and/or a household.
It would be an awful added pinch, possibly, in times that pinch us all.
I say, kick them in the Bumstead if they're up to any such mischief, each of them, all of them, if it is so. Using times of general credit crisis to squeeze individuals would simply be unjust. Perhaps unlawful. It should be.
_______UPDATE_______
This Google, gives interesting links, and because of a link I could not first get to open right in the return list, here, I opened the Google HTML item, here. Also of interest, the main player [aka the deep pocket] of the Community National Bank's North Branch management and ownership cabal might be Jerome Peterson, per who signs the consent document with the Fed, see here. Finally, because of the adverse news attaching to the trade name "Community National Bank," it is worth noting that an apparently wholly-unrelated bank felt it had cause to change names to avoid confusion and possible derivative ill-will; see here.
It would probably be news if the "Jerome Peterson" who appears to be a key player with the bank, and the "Gerald (Jerry) Russell Peterson" mentioned in the Strib reporting share any kinship. Again, with "Peterson" being so common a name, investigation would be needed before kinship could be proven and I have not investigated the question. I leave that to news outlets, or the Anoka County Attorney, the prosecuting authority mentioned in the Strib reporting.
_________FURTHER UPDATE________
This can get to be like "Who's on first base," routine, or this image from here or here. A doll inside a doll inside a doll, and they all look alike but not quite the same in size or other detail. Start with the sale of the North Branch outlet to another banking chain, but not the Lino Lakes or Vadnais Heights branches.Who in the situation has a binding consent decree with the Fed, and where are they located - and are they a valid and current corporation? As noted, the online decree was signed by Jerome Peterson, as head of the bank holding company, signatures dated 9 Dec. 2008; but which banks and ownerships were bound and for how long, were the signing holding company to go defunct?
Why ask?
Here's what the 9 Dec. 2008 caption below the signature page [p.5, here] says: COMMUNITY INVESTMENT SERVICES, INC. -- By: Jerome B. Peterson, President, with p.4 of that agreement saying "all communication regarding this Agreement shall be sent to: (a) [... the Fed's contact]; (b)Mr. Jerome B. Peterson, President, Community Investment Services, Inc., 5481 St. Croix Trail, North Branch, MN 55056." That's the street address of the North Branch bank.
The problem, if only that branch has been sold to another operation, is it correct to have the holding company of the bought-out venture using that address still while ostensibly not owning/operating/controlling that bank at that physical location? See this screen shot from a Google:
Add to it the confusion by the Minneosota Secretary of State's records showing the signing bank holding company is a corporation in good status only through 2008, last year, and not into or through 2009.
Dolls inside of dolls. Who runs the site at 5481 St. Croix Trail, North Branch, what is Jerome Peterson's role at that address, and who runs the Lino Lakes and Vadnais Heights sites, from where?
Interestingly, that last site, bottom line, has a "Bank Regulator" link, to here. That must be a requirement the feds imposed as part of reaching a consent. Yet the Comptroller's site differs with the Fed's, and if some violation of the consent decree happens, shouldn't notice go to the Fed, per the p.4 contact instructions, see it, here? What's up?
Are regulators, county attorneys, and the public being misled, when the web still contains info such as here, screen shot below, claiming all three branches remain affiliated? Ostensibly with aggregated financial data given:
What holding company in good and current status as a Minnesota corporation registered with the Secretary of State runs the North Branch site; and ditto for the Lino Lakes and Vadnais Heights locales? What successorship situation, if any, binds whom or what entities, to the decree signed with the Fed, if the signing corporation has been allowed to go defunct? Who would you sue, who would you serve? A can of worms, inside the smallest of the dolls? Why that uncertain? Go figure. Who is happier, possibly, with such uncertainties?