Bank slapped with $96.2 million penalty for fraud

by Ryan Smith10 Jul 2018

BBVA Compass Bank will have to shell out $96.2 million for allegedly defrauding a Texas real estate developer about his loans.

Texas State District Court Judge Staci Williams entered the ruling against BBVA Compass and one of its executives, upholding most of a December jury verdict that found the bank and the executive liable for fraud during loan renewal and modification negotiations with developer David Bagwell.

Trial jurors agreed that Compass and bank executive Sam Meade committed fraud by misleading Bagwell when he renegotiated the terms of his financing for three Texas housing developments.

According to the law firm Boyd, Powers & Williamson, which represented Bagwell, Compass deceived the developer about the status of his attempts to refinance the loans. Meade assured Bagwell that the loans were being renewed even as the bank was working to sell the loans at a steep discount to a rival developer, the law firm said. Once the debt was acquired by the rival developer, partnerships associated with the developments were forced into bankruptcy and lost control of the properties.

In addition to the actual damages suffered by Bagwell and his associated partnerships, the jury awarded $40 million in exemplary damages, meant to punish Compass and deter similar behavior in the future.

Williams’ ruling preserved most of the jury’s original $98 million penalty.

The bank has vowed to appeal the ruling.

“BBVA Compass strongly disagrees with the court’s judgment and believes that both the law and the evidence support a take-nothing judgment in favor of BBVA Compass,” the bank said in a statement. “We have faith that the judicial system is just and fair, and we look forward to seeking vindication of our position through the appellate process.”


Related stories:
BBVA Compass names mortgage banking, home equity director
Former Bankrate CFO pleads guilty in $25 million fraud scheme



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