US Century Bank on the rocks: will top insiders wriggle away from the law? ... by gimleteye

This U.S. Century loan was a second Mortgage for Marco Rubio (it was undisclosed on his Financial Disclosure at the time) and the subject of a 2008 Miami Herald probe. The Rubio property is now underwater with a purchase price of  $550,00 and current market value of $384,900. - Miami Dade County Clerk Records

Credit South Florida Business Journal's Brian Bandell with the intrepid journalist of the year award, for taking on the joke of a banking institution: US Century Bank. The Miami Herald fears to tread on the insider lawyer/business elite who swim in lazy circles around Miami and Miami Dade County government. The newspapers publishers and executives have always fostered a cozy relationship with special interests whose business models depend on extracting value from farmland and open space, including Everglades wetlands, in order to proliferate suburban sprawl like a cancer across the South Florida landscape. Who is to argue they weren't successful?

US Century Bank was established by Ramon Rasco and Sergio Pino, two of the top political insiders, to provide mortgages and underlying financing for their business models. US Century Homes fashioned itself as the local Cuban American version of Lennar: vertically integrated to provide the lowest cost, mass market product to buyers ginned up by the housing boom mirage. It turns out the bank's lending practices extraordinarily favored directors, including Rodney Barreto, Jose Cancela and the owners of Sedanos supermarket chain. (US Senator Marco Rubio's home mortgage originated with US Century Bank, at a time Mr. Rubio showed practically no net worth. But that, for insiders who benefited from US Century's piggy bank, is just the tip of the iceberg.)

Eye On Miami has tracked US Century Bank for years. Beginning in the mid-1990's, I dedicated nearly six years to fighting the Homestead Air Force Base fiasco, triggered by Rasco and his cronies at the Latin Builders Association who commandeered county government -- and untold tens of millions of taxpayer resources -- in the brazen attempt to lift ownership of the military base from the Department of Defense into the hands of private investors, eventually including Mas family interests. Today, Rasco is managing partner of a law firm that includes clients like the Fanjul sugar billionaires.

The fight for the air base was won -- if that can be called a victory -- by conservationists, but the subsidiary battle, to prevent suburban sprawl from invading South Dade like a toxic weed, was decidely lost during the housing boom that gobbled up farmland and restored the dreams of Rasco, Pino et al. while shunting environmental protection to the side.

We called US Century Bank, "the insider piggy bank", based both on evidence disclosed through FDIC reporting (see our archive) and quarterly analyses by Bauer Financial. We gave up reporting on the Bauer Financial reports once US Century Bank, bottoming out at a "zero" rating, seemed destined to collapse under the hubris of its founders and directors. Why the FDIC didn't shutter the bank is a mystery probably tied to other forms of influence peddling. It was, after all, according to South Florida Business Journal, the most undercapitalized bank in the United States and, in Florida, the largest recipient of TARP funding.

It is ironic that Republican Tea Party activists, who hated TARP -- the Bush and Obama effort to re-float the US banking system by injecting no-cost money into banks' balance sheets so they might lend out to people and businesses at prime rate and above -- failed to criticize US Century Bank or the Republican insiders who used it as their piggy bank. Both Pino and Barreto -- a Bush consigliere-- were some of the most visible GOP fund raisers in Florida. (Rasco showed up, in the last election cycle, hosting a fund raiser for Democrat, US Senator Bill Nelson.)

In a Nov. 26 report, Bandell writes about a shareholder lawsuit brought against US Century Bank:

The complaint alleges the bank was created to help its directors and their friends and family members finance construction projects under unusually favorable terms under lax underwriting standards. The complaint cited the high level of loans to bank insiders and nine of 24 branches being leased from bank directors Pino, Guerra and Herran in 2011.
Banking regulators allow insider loans and leases as long as the insiders don’t vote on them and the terms are comparable to market conditions. C1 Bank’s merger agreement calls for the rental rates on the insider branches to be reduced. The lawsuit alleges the rents for the insider branches were above market value.
The insider loans had little underwriting scrutiny and U.S. Century Bank’s loan transactions were used to help its directors and business associates gain political leverage, the complaint alleges. Davila previously told the Business Journal that U.S. Century Bank hasn’t taken any losses on its insider loans, but it has taken reserves for potential losses on them and some of those loans were modified in “troubled debt restructuring.”
“The defendant directors wasted corporate assets by, among other things, failing to supervise the unproportional level of insider lending which led to an over-abundance of non-performing loans, employing a liberal loan forgiveness program for insiders and/or their friends and business associates which were more favorable than those available to normal customers of the bank, failing to ensure diversification of the bank’s assets so as to avoid the risk of the bank’s undercapitalization and using the bank branch locations as an avenue to maximize personal profit for those defendant directors who owned the properties which housed said branches," the complaint states.

Late yesterday, US Century shareholders -- a large percentage of the banks's shares are held by insiders including Rasco -- voted to approve a shotgun marriage with Brazilian investors who recently created C1Bank, based in Tampa, that has rolled up a few other similarly distressed community banks. Under the terms of the agreement, US Century shareholders are essentially wiped out, but so are US taxpayers who will only receive $6.27 million of the $50.2 million US Century owed.

Rasco et al. still have to deal with furious shareholders. It is clear that many were left in the complete dark about the internal machinations. But whether the details ever see the light of day is in doubt. The current owners and former US Century insiders like Rasco are counting on business insurance protecting directors to kick in and for some settlement to be reached that hides the sordid details of Miami's insider piggy bank.

Eye On Miami guesses that there are many, many Miami and Miami-Dade County political insiders rooting for the whole rotten mess to be buried far from sight and all the damning paperwork to be thrown into an Everglades canal. Lifting the rocks covering US Century Bank loan details like those mega-tracts outside the Urban Development Boundary (Krome Gold) would provide a close-up view how political influence peddling really works. At the end of the day, Rasco and his fellow insiders can forcefully argue for letting the whole US Century Bank story sink beneath the waves.

There are a thousand reasons (no, closer to 44 million reasons) taxpayers deserve to know those details: those who do not understand history are bound to repeat it. That is, though, how we roll.