Settlement in FDIC lawsuit over Sonoma Valley Bank collapse

Oct. 07--Three officers of the failed Sonoma Valley Bank appear to have settled a $12 million lawsuit with the Federal Deposit Insurance Corp. for losses caused by risky real estate loans leading to the bank's 2010 collapse.

The suit filed in U.S. District Court in San Francisco two years ago named the bank's president and chief executive officer, Sean Cutting, former CEO and director Mel Switzer and vice president and chief loan officer Brian Melland.

It accused them of gross negligence and breach of fiduciary duty for their roles in the institution's failure, which shareholders said was brought on in part by $55 million in loans to late Marin County developer, Bijan Madjlessi.

Madjlessi, along with Cutting, Melland and Sonoma County attorney David Lonich were later indicted on federal fraud charges. All but Madjlessi, who died last year in a car crash, are headed toward trial sometime next year.

Terms of the FDIC settlement were not immediately available. It came after a Sonoma County judge upheld a $2 million settlement with the bank's shareholders.

Industry watchers said insurance companies for the defendants would pay some portion of the $12 million sought by bank regulators but the former bank officers themselves could be held personally liable.

The settlement is expected to be finalized later this fall. The parties were expected to agree to dismiss the case by Nov. 9, according to an order signed Sept. 23 by U.S. District Judge Richard Seeborg.

An FDIC spokesman did not return a call Wednesday morning.

Check back later for more details.

You can reach Staff Writer Paul Payne at 568-5312 or [email protected]. On Twitter @ppayne.

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