A federal agency is seeking $11 million from the two former heads of Community Bank & Trust of Cornelia, claiming they neglected to scrutinize home loan applications properly.

A lawsuit filed Feb. 24 by the Federal Deposit Insurance Corporation alleges Trent Fricks, the former senior vice president of one of the bank's retail banking groups, approved hundreds of home loans without verifying borrowers' financial information.

The suit also alleges that the loans were given without adequate value appraisals and without seeking authorization to lend at levels above his authority.

The FDIC also is suing Fricks' supervisor, former bank president Charles Miller, for failing to correct Fricks' mistakes despite being notified of them four years before the bank failed.

The attorney for the two men, Robert Long of Alston & Bird in Atlanta, says the allegations aren't true.

"The allegations against our clients have no merit," Long said. "We intend to defend against them vigorously."

State and federal regulators shut down Community Bank & Trust more than two years ago, handing it over to South Carolina Bank and Trust of Orangeburg, S.C.

It had been Habersham County's oldest and largest bank Miller became president and chief executive officer of the bank in November 2006, but had been an interim leader for a year.

 The lawsuit claims that under his leadership, the bank's lending grew 66 percent to $563 million by the end of 2008.

A Gainesville division president, William Galardi, tried to call attention to Fricks' mishandling of the loans more than once, according to the suit.

He first reported to Miller that Fricks was making loans in violation of the bank's policy as early as January 2006.

Specifically, Galardi discovered that Fricks would use the purchase price of a property to determine a loan amount, even if the appraised value of the home was lower than the purchase price.

Galardi also found that Fricks would not inspect the property to ensure that the loaned money was being used for its intended purpose.

Galardi notified Miller and Annette Fricks, the bank's chief operating officer and Trent Fricks' mother, of his concerns.
The suit alleges that neither responded to his accusations. Trent Fricks was promoted months later to division president of the Clarkesville branch.

In this position, Miller was Trent Fricks' direct supervisor, and the bank's loan exposure "grew dramatically," according to the suit. The FDIC claims Miller was notified at least four times of Fricks' mishandling of loans.

The FDIC lawsuit is the latest in a string of scandals surrounding the bank's demise.

Shortly after the FDIC took over, the owner of Cleveland Motor Cars filed suit, claiming fraud.

And in January 2011, one of the bank's former executive vice president, Randy Jones, pleaded guilty to taking more than $770,000 in kickbacks for phony land deals. Jones used the names of family members without their consent to obtain more than $800,000 in loans from the bank and approved more than $2.8 million in loans to fraudulent borrowers.

Jones resigned from the bank in July 2009.

He was charged along with three other defendants who helped him defraud the bank.

Joseph C. Penick Jr., 50, of Cornelia and Douglas C. Emig, 55, of Clarkesville each pleaded guilty in August 2011 to one count of conspiracy to commit bank fraud.

Additionally, Berrong Moulton, 44, of Cleveland pleaded guilty in September 2011 to the same crime.