BENTON -- Grand Rivers Community Bank filed suit in federal district court last week, alleging Peoples National Bank and associated personnel violated numerous banking laws for personal gain that harmed Grand Rivers.
In the 61-page suit, Grand Rivers and its holding company Main Street Bancshares name Frank William Bonan, Frank William Bonan II and H. Keith Botsch as defendants.
Bonan, of Mount Vernon, is the president, chairman and general counsel for Peoples, which also is named as a defendant, and vice president of Market Street Bancshares. Market Street, also named as a defendant, is the holding company for Peoples.
Bonan II, of Harrisburg, is the former chairman of Main Street and Grand Rivers and currently is a director of Market Street and Peoples.
Botsch, of Carmi, is a former member of Grand Rivers' executive committee and does accounting work for Grand Rivers. He also is a director of Market Street and Peoples.
The suit claims that since 2010, the five defendants have controlled and functioned as indirect owners of Grand Rivers and Market Street, which the suit alleges is a violation of federal and state regulations.
The suit claims that in 2010, Bonan II and Botsch -- who were directors of Peoples at the time -- became two members of Grand Rivers' 3-member executive committee. That committee was responsible for approving all of Grand Rivers' loans.
The suit alleges that many of the loans approved by the executive committee were for the benefit of Market Street, Peoples, insiders of those companies, family members and friends of Bonan II and Botsch. Companies owned by Bonan II also benefited, the suit alleges.
It further alleges that many of those loans were substandard, of which Bonan II and Botsch were aware. The two men did not disclose the quality of the loans to Grand Rivers or Main Street, the suit alleges, and when questions were raised by Grand Rivers employees, Bonan II forced approval for the loans.
Loans cited in the suit had the net effect of transferring capital from Grand Rivers to Market Street, the holding company for Peoples by using straw borrowers. In the first instance the suit cites, three $490,000 loans were made to family members of a shareholder, director, and insider of Peoples. The three borrowers' ages were in the 20s, and none were Grand Rivers clients.
Each loan was secured with 1,841 shares of Market Street common stock, pledged by the Peoples insider, the suit alleges. It further alleges that the stock pledged did not exist. It goes on to claim that the Market Street and Peoples used the total of those loans, $1,470,000, to repay a loan from the federal government through the Troubled Asset Relief Program. TARP was part of the federal government's response to the 2008 subprime mortgage crisis, which caused worldwide drops in stock markets.
The suit contains several specific instances of what it alleges are business dealings by the defendants whereby Grand Rivers employees questioned whether a particular loan to a family member, friend, Peoples insider or other related individual or company was financially sound. In those instances cited in the suit, Bonan II is alleged to have overridden any concerns about the loan, and demanded that the loan be approved.
A spokesman reached Monday at Peoples' corporate office in Mount Vernon said the bank had no comment regarding the suit.
"It is the position of Peoples National Bank and Market Street Bancshares that we don't comment on pending litigation" the spokesman said.