JC Flowers Owned Bank that was Penalized by FinCEN for Money Laundering

ANDORRA, May 3, 2016 /PRNewswire/ -- J.C. Flowers & Co., the company selected by the Government of Andorra to take over the assets of Banca Privada d'Andorra ("BPA") expropriated from the Ramon and Higini Cierco, has a history with FinCEN. The firm bought a small bank in the United States that was itself penalized by FinCEN for undertaking huge transactions with customers in Mexico and the Dominican Republic.

Saddle River Valley Bank (SRVB) was a small, two-branch New Jersey bank that was struggling after the financial crisis. J.C. Flowers & Co. was searching for a bank to invest in as part of a strategy to acquire more failed banks from the Federal Deposit Insurance Corp.  SRVB opened up a wire transfer service with Latin American countries, and under J.C. Flower's leadership from 2009-2011, the bank handled $1.5 billion in financial transactions with customers in Mexico and the Dominican Republic, while the bank managed only $120 million in assets domestically. Unlike BPA, Saddle River Valley Bank was a tiny domestic operation whose involvement in Latin American money laundering dwarfed any legitimate business operations.

Saddle River's Latin American transaction business caught the attention of FinCEN, which opened up an investigation into the bank in 2011. J.C. Flowers hurriedly sold its shares soon after, and the bank had to accept a buyout deal with Union Center National Bank, which greatly undervalued SRVB and cost the remaining minority shareholders a great deal of money.

In 2013, SRVB settled with FinCEN and other authorities for $8.2 million over charges that included failures in recording keeping, reporting, and a failure to have an effective anti-money laundering program in place. J.C. Flowers & Co. claims it did not know about SRVB's wiring services, despite spending 9 months looking into SRVB's books and business before deciding to buy in.  And how could a controlling shareholder miss the fact that the bank had so few assets and its principal business appeared to be handling transactions with Latin American customers worth nearly fifteen times the assets of the bank?

Six local, minority shareholders who lost money decided to sue SRVB, J.C. Flowers & Co., and J.C. Flowers & Co.'s affiliated SRV Holdings in late 2012 for failing to uphold their promises of revamping SRVB. Court records were sealed by request of all parties, so specific plaintiffs and defendants are unknown besides ex-Mayor Conrad Caruso, who was the initiator of the suit.  The case was eventually settled for $1.2 million.

So now we see the hypocrisy of AREB, which claims that J.C. Flowers "achieves every single objective pursued by the Resolution Plan for Banca Privada d'Andorra (BPA)."  What objectives are those?  Finding a purchaser that owned a bank that was doing massive money laundering and was penalized by FinCEN?  Finding a purchaser that claims it could not discover $1.5 billion of tainted transactions in a bank with $120 million in assets?  What can AREB expect J.C. Flowers to bring to Andorra, the same care and ethics that it showed in the United States?  Or is this just an attempt to sell to anyone to sweep Andorra's massive incompetence and lack of transparency under the carpet?

Timeline:

2006 - Saddle River Valley Bank is formed by Conrad Caruso, who wanted to create an entity that offered investment and lending services to local businessmen.

2007-2008 - SRVB has mediocre performance up until the financial crisis struck. The Bank began struggling to stay afloat.

2009 - For the first nine months of 2009, Saddle River Valley Bank was being courted by JC Flowers & Co. JC Flowers & Co. spent months looking into the Bank's books before coming to a deal for majority ownership.

During this time, the bank starts offering international wire transfers for a fee.

A deal was reached for around $7 million in October 2009 from JC Flowers & Co. and its affiliate, SRV Holdings LLC.

2010 - SRV Holdings officially acquires enough shares to take control of the bank.

2011 - Saddle River Valley Bank gets the attention of regulators, who ordered the lender to stop violating anti-money laundering laws and to set up an effective program to measure account activity.

Saddle River Valley Bank did not comply with the standards, and the Office of the Comptroller of the Currency opens an investigation.

2012 - The bank is struggling again, and agrees to sell the majority of its assets and deposits to Union Center National Bank for $9 million, a highly undervalued sale.

Six minority shareholders, including original founder Conrad Caruso, sue the Bank, JC Flowers & Co., and the bank's board of directors for leading the bank to ruin.

2013 - Saddle River Valley Bank settles with FinCEN and the OCC for $8.2 million.

Flowers had sold their shares of the bank in 2012, but the investigated actions took place from 2009 to 2011, during the time when JC Flowers & Co. was managing the bank. JC Flowers & Co. denies any knowledge of the events and no official charges were filed.

2014 - The minority shareholders settle for $1.2 million.