Judge to Decide if Miami Attorney Helped Hide Illegal Bank Activity

Alana Roberts

Daily Business Review

Miami attorney Carlos Loumiet covered up crimes at Miami's Hamilton Bank in an ostensibly independent investigation before the bank was shut down for fraud, a lawyer said Tuesday in closing arguments at his civil regulatory trial.

But Loumiet attorney Alan Greer asserted the U.S. Office of Comptroller of the Currency "should be ashamed of its conduct in this entire case" for failing to prove any cover-up. The OCC is seeking a $250,000 fine and a cease-and-desist order, which would prevent Loumiet from providing legal or consulting services to federally insured financial institutions -- his mainstay for years. Administrative Law Judge Ann Z. Cook must determine whether Loumiet helped hide the illegal activities of three bank officers who are serving federal prison terms for their roles. She said she would have a decision within 60 days, but encouraged the parties to settle.

The OCC accused Loumiet, a partner in Hunton & Williams' Miami office, of helping Hamilton executives conceal a fraud leading to the 2002 shutdown of the bank -- one of the largest bank failures in Miami history. Federally insured losses cost the Federal Deposit Insurance Corp. $127 million and shareholders lost all of their holdings with the bank's collapse. Loumiet "exonerated the officers," OCC attorney Lee Straus asserted.

The case centers around two reports by Loumiet, who found no illegal trades at the bank, and a fax dated Sept. 21, 2000, which could prove whether he knowingly tried to protect the bank executives.

In the fax, Hamilton general counsel J. Reid Bingham confirmed an adjusted price trade of a Moscow loan for Hong Kong debt with a West Merchant Bank of London official. Straus maintained during a three-week trial last October that Loumiet removed the cover sheet to hide the source of the fax.

"The importance of [the fax] is it shows the bank's officers were engaged in a swap and it shows a misrepresentation on the part of Mr. Loumiet," he argued. Greer countered, "It wasn't Mr. Loumiet who took off the cover sheet or ignored the meaning of the documents." But Straus maintained the complete fax was in Greenberg Traurig files. "That argument is a red herring," he said in closings. "We don't know who split the fax. We know Mr. Loumiet was put on notice."

After the hearing ended, Greer said there was no evidence Loumiet acted for his own benefit. "He was transparent. He clearly did not conceal anything."

Greer noted Grossman was the lead attorney for part of the investigation and Loumiet came in later.

Greer maintained the OCC reached conclusions about the bank officers after an 11-month investigation, and the Greenberg team worked on its first report for only two months.

Straus said: "We've addressed this hours issue. The amount of hours worked doesn't determine" Loumiet's role. He stressed Loumiet's expertise in banking law.

"Mr. Loumiet is an extremely experienced and sophisticated lawyer. He was the banking expert," Straus said. "Why would the chair of the banking [practice] take a back seat" in a banking investigation. "Usually in a large law firm, it's the minions putting in most of the hours," he added. "Lawyers are used to working under a time crunch."

The OCC's case relies on reports written in November 2000 and March 2001 by a team of Greenberg lawyers led by Loumiet and fellow shareholder Robert Grossman.

Greenberg was retained to help deal with questions from Hamilton's outside auditor Deloitte & Touche about the trades after internal auditors and regulators raised questions. Three Hamilton officers were convicted of participating in a series of illegal trades where they sold securities above market value and purchased other securities above market value to hide the bank's losses. The OCC alleged Loumiet's participation in the outside investigation of the bank created a conflict of interest because the firm represented the bank in other legal matters. He is accused of helping the bank hide losses from $22 million in Russian loans by concluding there wasn't enough evidence to prove the transactions were illicit trades.

Greer claimed during trial that OCC attorneys used his client as a scapegoat by alleging he should have caught the bank officials' illegal conduct even though agency officials hadn't figured out what happened. Greenberg collected $1.16 million in fees from the bank in 2001 and 2002, and Loumiet received a portion. He left Greenberg in 2001 after a 19-year career including 10 years as head of the firm's international and banking practice. OCC officials allege the Greenberg reports helped protect bank officers by making false and misleading statements and suppressing evidence.

Greenberg settled FDIC charges against the firm for $7.6 million, and the firm and Grossman paid $925,000 to settle OCC charges.

Disgraced Hamilton CEO Eduardo Masferrer is serving a 30-year prison sentence on his federal conviction, which was upheld in January. Two other former officers -- president Juan Carlos Bernace and chief financial officer John Jacobs -- pleaded guilty and testified against Masferrer in exchange for reduced sentences. They received 28-month prison terms on two counts of securities fraud. Straus used the 11th U.S. Circuit Court of Appeals decision in Masferrer's case to bolster his case against Loumiet. He argued both Bernace and Jacobs pleaded guilty to performing an illegal price swap, but Loumiet did not find fault with their work in his two reports. Even if Cook decides in Loumiet's favor, he could face discipline from the Florida Bar whose officials confirmed last year that the state legal profession's regulatory arm opened investigations of Loumiet and Grossman.

Grossman's case is pending with a Bar grievance committee, while Loumiet's remains a step behind with the Bar's staff, spokeswoman Susannah Lyle said Monday. She said Loumiet's case is still at the staff level because of the pending OCC hearing. The grievance committee will determine whether there is probable cause. A probable cause finding could lead to a complaint with the Florida Supreme Court, which has the ultimate authority to determine whether attorneys face disciplinary action.