Court orders Bank of Oswego to pay Dan Heine's legal fees
Bank's board of directors rejected the request from its former CEO, saying he did not act 'in good faith'
U.S. District Court Judge Michael Simon ordered The Bank of Oswego on Friday to cover former CEO Dan Heine's legal costs in a pending criminal trial.
Heine sued the bank in August, arguing the bank's articles of incorporation require it to pay all legal expenses for any person involved in a criminal action as a result of their role as a director or officer of the bank. The banks board of directors passed a unanimous resolution on July 21 rejecting Heines request.
On Nov. 3, the banks attorneys defended that decision, saying Heines claims for financial relief defy the unambiguous language of the banks articles and Oregon law.
But Simon was not so easily convinced, saying at the close of the four-hour proceedings that he would likely need the next two weeks to issue a decision. As it turned out, he only needed 10 days.
Simon found that ambiguity in the bank's articles of incorporation allowed him to rule in Heine's favor. Simon also found the $640 hourly rate of Heine's chosen attorney, Jeffrey Alberts, to be at "the upper limit of a reasonable rate for Heine's defense" in the criminal action, citing prevailing market rates in that area of legal defense.
However, Simon concluded the bank was not required to pay for Alberts' $400,000 retainer, arguing the bank's articles of incorporation allow for the advancement of expenses incurred.
"Because a retainer serves as a guarantee to pay expenses incurred in the future, it is not itself an 'expense incurred,'" Simon wrote in his decision.
Earlier this month, Simon granted the bank its counterclaim for an amount of just over $141,600, which Heine admitted he owes the bank after defaulting on a $100,000 loan, nearly $30,000 in credit card debt and the resulting interest on both. But Simon ruled that the bank will not be allowed to use that debt amount to offset Heine's legal fees.
The bank also may have to cover Heine's costs in his civil suit against the bank, although Simon did not rule on that point Friday.
Heine and ex-Bank of Oswego Chief Financial Officer Diana Yates face 27 federal criminal charges, including conspiracy to commit bank fraud and making false bank entries. Prosecutors for the U.S. Attorneys Office have alleged that both were involved in a scheme to hide bad loans from the banks board of directors, shareholders and regulators in an effort to portray the banks financial condition as much better than it was.
The allegations gained traction in July, when former Bank of Oswego executive Geoff Walsh admitted his role in such a scheme as part of a plea deal on the eve of his own criminal trial, which was to include 32 fraud-related charges unrelated to his time at the Lake Oswego financial institution.
If convicted, Heine and Yates face a maximum of 30 years in prison for each count, as well as the forfeiture of any money or property obtained as the result of the violations.
Heine and Yates are scheduled to appear before Simon on Nov. 18 for a status conference, at which point their criminal trial will likely be scheduled.