NewDominion’s ex-president fined $3,000, ‘moving on with my life’ [The Charlotte Observer, N.C.]

Dec. 31--The former president of NewDominion Bank has been fined $3,000 and barred from bank management for "personal dishonesty" that resulted in financial gain while causing the Charlotte bank to lose money, according to an order released Friday by the Federal Deposit Insurance Corp.

Robert G. Fox Jr., who resigned from the bank in April 2010, participated in "unsafe and unsound banking practices and breaches of fiduciary duty," according to the order, which is dated Nov. 2 but was made public on Friday. Fox waived his right to a hearing on the matter.

A few months after Fox's departure, state and federal regulators placed NewDominion under an order requiring it to raise capital and establish new credit processes. The bank has since rebuilt its management team and hired a new chief executive, John Hipp. Bank officials declined to comment.

Reached by the Observer while out of town Friday, Fox said he was embarrassed and sorry for what happened but said the FDIC's response was a bit overblown. "I'm not defending my actions. I think I've paid for it multiple times over," Fox said. "I'm retired from banking, literally and figuratively, and just moving on with my life."

Fox said the order deals with one transaction involving furniture the bank bought as it foreclosed on a house. The bank wanted to keep the furniture to help the house show better and bought the items for $25,000, Fox said.

Two weeks later, he said, the house was resold, but the new buyer did not want the furniture. Fox bought it for less than the $25,000 price without asking anybody, using a third-party straw buyer to conceal the transaction, he said. Most of it was disposed of, he said. "I honestly thought I was getting rid of it," he said.

When confronted, Fox said he admitted what he had done and resigned from the bank. He said he paid back the bank in full and also gave up a $364,000 retirement plan. "At the end of the day, the bank did not incur any loss on the transaction. ... It had nothing to do with the loan losses, nothing to do with the real estate. It had nothing to do whatsoever with the troubles that the bank has had over the last 18 months," he said. "I'm embarrassed to tell you, but that's the God's honest truth."

Experienced banker

Fox came to the bank from First Charter Corp. in 2005, shortly after NewDominion opened, as president and chief credit officer. He had a three-decade background in Charlotte banking and experience putting together big deals.

The executive also had strong community ties: He served as an elected official in Mint Hill, including a four-year stint as the town's mayor, in the 1980s and 1990s. He now sits on Appalachian State University'sBoard of Visitors, among other roles.

The accusations against Fox contrast with the NewDominion founders' vision for the bank, which they said was built largely on faith and personal values. NewDominion got its start in January 2004 when two Charlotte businessmen, Xan Law and Lew Parham, persuaded two SouthTrust Corp. executives to leave their jobs and start a bank to serve small and mid-sized businesses.

The bank opened a year later, after CEO Bradley Thompson and chief financial officer Benjie Guion raised a then-state record $40 million in startup capital. The founders were devout Christians, having participated in a men's Bible study that met in the SouthTrust board room and calling each other "accountability partners" who would help each other uphold Christian standards in their lives.

Shaky run

In its first year, NewDominion bolstered its assets, entered the mortgage brokerage business, added experienced loan officers and stayed afloat amid competition from large, regional and community banks in the Charlotte market.

By fall 2006, NewDominion had reported its first profitable quarter, making about $738,000 in the period ended Sept. 30. The following January, NewDominion signed a 15-year lease for 32,000 square feet in the $225 million Metropolitan project near uptown.

Then the recession hit. Mecklenburg's community banks -- which together hold less than 1 percent of the Charlotte area's total deposits -- largely stayed under the radar as giant banks posted poor earnings and accepted bailout loans. But as the downturn dragged on, smaller banks began suffering, too. NewDominion disclosed in November 2010 that the FDIC and N.C. Commissioner of Banks had placed it under an order requiring it to raise capital levels and establish new credit processes. The bank hired Hipp, who had experience turning around other troubled lenders, and began revamping its business model to focus less on real estate lending.

NewDominion's losses have continued, though it made a $1.5 million profit in the first nine months of the year, compared to a loss of $11.2 million the same period in 2010.

Hipp has predicted a return to profitability in 2012.

: 704-358-5235

___

(c)2011 The Charlotte Observer (Charlotte, N.C.)

Visit The Charlotte Observer (Charlotte, N.C.) at www.charlotteobserver.com

Distributed by MCT Information Services