FDIC sues over risky land loan to Stapley


A m e r i c a n  P o s t – G a z e t t e

Distributed by C O M M O N  S E N S E , in Arizona
Tuesday, March 27, 2012

FDIC lost $5.5 million on “unsafe and unsound” loan given to Stapley        

Loan was listed on 2009 County Attorney indictment against Stapley

More corruption involving lame duck Maricopa County Supervisor Don “the Don” Stapley, this time involving a loan he was being investigated for by Sheriff Arpaio and former County Attorney Andrew Thomas. Stapley lied about his assets in order to obtain this unscrupulous loan. Arpaio and Thomas tried to prosecute him for lying about his assets on financial forms. It is unfortunate Stapley was able to fend off prosecution, it ends up costing taxpayers more now that another government agency has to take up the slack and follow through.  We heard that the FBI was at county offices yesterday. No wonder Stapley has announced he is not running for reelection, nor for any other office. The Phoenix Business Journal article is below.

“Stapley was accused of inflating his assets and lying about his real income by Maricopa County Sheriff’s Office investigators to obtain loans from Silver State and Mortgages Ltd.    , including the $5.5 loan detailed in the FDIC lawsuit against the Silver State bankers.”

Maricopa County Supervisor Don Stapley tied to Silver State Bank loan

Phoenix Business Journal

by Jennifer Johnson

March 24, 2012

 

Earlier this week, the Phoenix Business Journal wrote about four former Silver Statebankers who were sued by the Federal Deposit Insurance Corp.    for making risky land loans to developers.

The lawsuit describes more than a dozen loans made to six developers that involved what regulators described as unsafe and unsound underwriting practices. In an interesting twist, one of the developers was Maricopa County Supervisor Don Stapley.

The $5.5 million Stapley loan described in the FDIC lawsuit was relatively small compared to borrowers such as Las Vegas developerThomas Jurbala, who told ProPublica he received about $100 million in loans from Silver State over a decade. Stapley and entities he owned also received other loans from Silver State, but only one $5.5 million loan is cited in the FDIC lawsuit against the four Silver State bankers for unsafe and unsound banking practices.

FDIC LOSSES

Stapley has not been accused of any wrongdoing, but the FDIC said it lost more than $5.2 million on the $5.5 million loan he received in September 2006.

This loan is interesting because in 2009, the Maricopa County Attorney’s Office indicted Stapley on 27 separate felony counts-and one of those counts is linked to Stapley’s $5.5 million Silver State Bank    loan.

Investigators from the Maricopa County Sheriff’s Office accused Stapley of initiating a complex scheme to defraud banks into lending him millions of dollars so he could develop high-end residential properties.

The loan matter is just a chapter in the highly charged dispute between Stapley and Maricopa County Sheriff Joe Arpaio that included the East Valley supervisor being arrested in a county parking garage and ended with two rounds of indictments and charges against him being dropped. It shows some of the complicated, convoluted and sometimes questionable lending and real estate business practices that permeated the Arizona marketplace during the last land boom and bust. Indictments brought against Stapley by Arpaio and former Maricopa County Attorney Andrew Thomas were dismissed or dropped.

In the second round of indictments, Stapley was accused of inflating his assets and lying about his real income by Maricopa County Sheriff’s Office investigators to obtain loans from Silver State and Mortgages Ltd.    , including the $5.5 loan detailed in the FDIC lawsuit against the Silver State bankers.

Stapley is an East Valley Republican who was briefly in the race for Arizona’s new 9th Congressional District but dropped out earlier this month.

STAPLEY PROJECTS

Back in 2006, Stapley and entities he owned were involved in developing two separate projects: 19 custom homes in Gilbert, known as the Sonterra development, and 17 custom homes in Queen Creek, known as the Paseo de Pecans development. To finance the projects, Stapley and companies in which he had an ownership stake, borrowed from Mortgages Ltd. to buy undeveloped land for the projects. Most of the Mortgages Ltd. loans were meant to be a short-term bridge until more conventional financing, with lower interest rates could be found.

In September 2006, Stapley’s company, Arroyo Pacific Partners LLC, along another entity, Tangelo Avenue Investments LLC, took out the $5.5 million Silver State loan to pay off a previous Mortgages Ltd. loan.

According to court documents, the Silver State loan officer who gave Stapley the loan, Tim Kirby, based the value of the loan on the estimated value of the finished development project, rather than the raw, undeveloped land.

In the boom years, bankers weren’t concerned about basing the loan values on undeveloped land because appraisals were steadily rising. The problem was that Stapley’s Sonterra project was never finished – and he ultimately walked away from the project shortly before the bank failed in July 2008.

Regulators said the lack of improvements on the Sonterra development site should have been a major red flag for the Kirby. That’s because almost all of the $5.5 million Silver State loan was being used to pay off the previous Mortgages Ltd. loan on property that already was worth much less than the appraisal value.

Maricopa County Sheriff’s Office investigators raised questions about how Stapley was able to borrow millions from Silver State and Mortgages Ltd.

On Stapley’s taxes filed for 2005, the year prior to when he received the $5.5 million loan, he reported a loss of $73,000 on his $60,000 salary.

That’s where this saga takes another bizarre twist.

WOLFSWINKEL DEAL

Maricopa County Sheriff’s Office investigators interviewed Kirby to find out why he had approved multiple loans to Stapley, despite knowing about Stapley’s 2005 tax statement. Kirby told investigators Stapley’s attorney had given him documents describing options agreements between Stapley and companies owned by Arizona land baron Conley Wolfswinkel and Wolfswinkel’s family.

Stapley agreed to plege his options income as a personal guarantee on at least one Silver State loan.

Lawrence Rollin, an attorney at Udall Law Firm LLP in Tucson, who has worked with the Wolfswinkel family, said companies owned by Wolfswinkel and Stapley brokered three deals for land options on undeveloped parcels in Pinal County.

In August 2003, Stapley’s company, Arroyo Pacific, purchased a 200-acre parcel in Pinal County from an entity owned by the Wolfswinkel family. Stapley granted the Wolfswinkel company the option to repurchase the property for the same price within the next two years. According to bank records obtained through a Maricopa County Sheriff’s Office search warrant, Arroyo Pacific Investments was paid about $180,000 in options payments from Wolfswinkel between August 2003 and May 2004.

In June 2004, Stapley’s Arroyo Pacific sold 160 acres back to Wolfswinkel for $1.5 million. Stapley earned an additional $113,387 commission on the sale. Wolfswinkel then resold the same 160-acre plot for $4.4 million. The next month, Wolfswinkel purchased the remaining 40 acres from Stapley for $1.9 million. Stapley pocketed another $5,616 in commission.

Stapley then used his profit to broker two additional options deals with Wolfswinkel on two 70 and 80 acre parcels of land in Pinal County. Stapley earned thousands of dollars on the options payments from Wolfswinkel, which he then pledged as a personal guarantee for his Silver State loans.

SILVER STATE LOSSES

According to indictment court papers, one month before Silver State was closed by the FDIC, Stapley informed the bank he was walking away from his Sonterra development project. In July 2008, the bank failed, and now more than three years later, the FDIC says it lost $5.2 million on Stapley’s loan.

Questions remain about whether regulators were able to seize that options income when the bank failed, or if Stapley got to keep that income when he walked from his Sonterra development project.

The FDIC said it does not comment on pending litigation.

Even though the FDIC says it lost $5.2 million, an independent special prosecutor found there was insufficient evidence to prove that Stapley engaged in a scheme to defraud Silver State or to prove that it had suffered direct harm as result of his actions.

That is little confusing, because Silver State bank failed when developers such as Stapley began to default on loans the bank had made. Stapley’s loan was a drop in the bucket compared to many of the much larger loans the bank had made. As large uninsured depositors found about the bank’s troubles, they began to pull funds at lightening speed.

Stapley may have had an inkling the bank was troubled, but he definitely knew his own project was troubled. In March 2008, he sold his interest in the loan to Tangelo Investments. That left Tangelo Investments, not Stapley, on the hook when he walked from his development project.

Stapley deferred comments to his attorney, Merwin Grant, who said he was confused by why I was asking about the $5.5 million Silver State loan to fund Sonterra. Grant, who incidentally also is Stapley’s attorney in his fight against Maricopa County, said he could only comment on Stapley’s lawsuit against the FDIC.

That is the final bizarre twist in this convoluted tale.

After walking way from his Sonterra development project, Stapley turned around and sued the FDIC as a receiver for Silver State bank. One would think it would be the other way around.

Stapley alleged that Kirby had made numerous mistakes when he described the property and options that were pledged as loan collateral for another separate loan he received to fund his Paseo de Pecans development. Furthermore, Stapley alleged that his other development, Paseo de Pecans, failed because that separate loan, was never fully funded. That lawsuit was ultimately dropped, and Stapley and the FDIC paid their own court costs.

It’s hard to know what really happened in all of this minutia, except that the FDIC says it lost $5.2 million as a result of a loan Stapley originally received. But this is worth writing about for one reason: the complicated back story behind the Stapley loan illustrates the challenges and the complicated web regulators are up against in trying to recoup lost money for the deposit insurance fund. The FDIC mostly targets bankers, not developers for their unsafe and unsound banking practices. But the Stapley loan and the public records available offer a peak behind the curtain into how developers were operating during the boom times. This developer just happened to be the Maricopa County Supervisor.

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Comments

  1. Wasn’t Andrew Thomas prosecuted by the Arizona Bar for trying to prosecute Don Stapley for filing false financial forms in order to get approved for that crooked loan? Does this mean the Arizona Bar’s prosecution of Thomas gets thrown out? Stapley is crooked to the core. Glad to see he’s finally getting his due.

    • No, he wasn’t.

      • Sgt. Flapjaw says:

        Well that settles it. Rob says “No, he wasn’t”. That convinces me.

        • Thomas hasn’t been prosecuted by anyone, let alone the state Bar.

          He has undergone an ethics hearing.
          I understand if you need to look either of those words up.
          Take your time.

          Then, you may want to look up the legal meaning of “prosecute”.

          Did that settle it, Flapper?

    • TruConserv says:

      Perhaps you missed this part from the article:

      “Stapley has not been accused of any wrongdoing,”

      and

      ” an independent special prosecutor found there was insufficient evidence to prove that Stapley engaged in a scheme to defraud Silver State or to prove that it had suffered direct harm as result of his actions.”

      I have no doubt that Stapley should never be elected to office again. I wish he would resign effective immediately, Criminal charges, however, require more than just “well, we all know …” It needs real evidence. The independent investigators couldn’t find enough.

      As I commented previously, the sins and errors of Arpaio and Thomas in conducting the politically motivated witch hunt against the BoS has given it, sadly, a de facto immunity.

      Now, because Arpaio and Thomas made up so many completely false charges, the ones where real evidence just might exist just get lumped into “it’s all political” bucket.

      Blame this mess on Arpaio and Thomas. If all this is so clear to you that Stapley is a crook, then just how ineffectual and completely devoid of police/ prosecutorial efficacy must be those two twits.

      Just as conservatives lose credibility when we are all anti-Obama, all-the-time, so too Arpaio and Thomas have no credibility when it comes to the BoS. For that matter, they are just like the “American Post Gazette,” that seemingly has never heard of Strunk & White, much less the AP Stylebook – and clearly have no respect for the rule of law and the American system of jurisprudence that protects it.

      • Conservative American says:

        And you ALWAYS end with this, TC:

        “Just as conservatives lose credibility when we are all anti-Obama, all-the-time, so too Arpaio and Thomas have no credibility when it comes to the BoS.”

        More “concern” from the liberal concern troll, LOL! You are always “concerned” with conservatives “losing credibility”. And, of course, we shouldn’t be “all anti-Obama, all the time”, especially sinice he’s running for reelection this year.

        “TruConserv says:
        February 11, 2012 at 5:11 pm”

        “Seriously, if you don’t understand the good that comes from praising Obama when he gets it right, and instead think we should always attack him, then surely you must understand why you have absolutely no credibility when you offer criticism.”

        “If all you ever respond with is a negative, even when someone has done good, how can we ever know when you are just faking outrage and when you actually have a legitimate point to make?”

        TC is sticking to the Pinko message. Very consistent, LOL!

        TC, “credibility” is a non-issue. Like all liberals, all you want is for Conservatives to lay off of Obama so that he gets a free ride.

        The only “credibility” issue is that you have no credibility as a Conservative. That’s understandable because you are a liberal Pinko, LOL!

        Have a nice day, TC! :-)

        • TruConserv says:

          What’s funny is that you think that my consistency somehow undermines my argument.

          I suppose when you lead your life not by what you think is right, but by whatever is opposite the acts of others, such consistency seems odd.

          Conservatives are guided by their principles, as they are formed by their faith, their families and their communities. Reactionaries, in contrast, are not conservatives.

          • Conservative American says:

            What argument? All you have is your liberal opinion. Where are the facts, the research, the polls to support your argument? Do you have a shred of objective data to support your unfounded theory?

    • In addition, Derek is confused about the financial forms. Thomas was investigating personal financial disclosure forms filed by political office-holders. Those forms have nothing to do with qualifying for any loans.

  2. Thanks for letting us know about this. I hadn’t read anything about this in the Arizona Repugnant. It only reports news that makes conservatives like Arpaio and Thomas look bad. This should have been front page news that Stapley’s dishonest financial doings are finally being investigated. The Repugnant is in the tank for the Stupidvisors and will protect them right up until Stapley finally goes to prison.

  3. Conservative PC says:

    It is a tragedy what the Supervisors, their cronies at the State Bar, and the left wing news media have done to Thomas. Am glad to see all of the truth finally coming out. Thomas tried to take on the powerful entrenched County Supervisors and they ruined his life. Now he risks being disbarred over it. All to save the hide of one of the most corrupt County Supervisors ever. What a disgrace and waste of taxpayers’ money. Those involved should be ashamed of themselves. Stapley should have been forced to resign years ago and put behind bars. More and more news keeps coming out about how sleazy he is, yet nothing ever happens to him, he continues on in office untouchable. Meanwhile Thomas is being prosecuted in one of the most vicious, one-sided prosecutions ever. The double standard is sickening.

  4. The McRINO Machine is flying off its rails, the juggernaut of corruption should seriously damage McFlake, McAdams and McWorsley!

  5. In my opinion, it was completely worth it. Those hair plugs are amazing. Oh, wait, I usually shy away from criticizing personal medical decisions. But when you pay for it with campaign funds, I can’t keep a straight face.

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