Bank of Saipan sues Fennell, attorneys

More than a year since it reopened, the Bank of Saipan is suing its former receiver, Randall Fennell, and attorneys and law firms that he retained at the time when the bank was in receivership.

The bank accused Fennell and his attorneys of breaching their fiduciary duties to the financial institution, which, at one point, the former receiver denigrated as a “failed institution.”

The lawsuit, filed at the Superior Court yesterday, seeks damages against Fennell, lawyers Richard Pierce and David Axelrod, and the law firms White Pierce Mailman & Nutting and Schwabe Williamson & Wyatt.

“Fennell reopened the bank during his tenure without any rehabilitation plan in place, thus allowing depositors to withdraw a large percentage of the bank’s deposits and precipitating a ‘run’ on the bank, seriously eroding the bank’s equity position and endangering the ability to become rehabilitated,” said bank lawyer David Mair, in a civil complaint.

“Once appointed receiver, Fennell, and the receivership attorneys owed fiduciary duties to the bank, including, without limitation, the duty to conduct the receivership in the best interests of the bank, to avoid harming the bank, to disclose all material information affecting the receivership, and to place the interests of the bank above his own personal interests,” he added.

Mair said Fennell and his attorneys repeatedly and deliberately failed to disclose material information to the bank, including conflicts of interests and hostility to the bank and its shareholders. Fennell pushed for the bank’s liquidation.

“Fennell and the receivership attorneys were motivated by, and conducted the receivership consistent with, a hidden agenda to destroy rather than rehabilitate the bank, and to retaliate against certain of the bank’s directors and major shareholders, to the detriment of the bank, its depositors and shareholders,” Mair said.

On April 30, 2002, the court appointed Fennell as temporary receiver upon the request of the CNMI government. On May 10 that year, Mair said Fennell exclusively submitted a pleading in court, which resulted in an order extending the receivership indefinitely.

Mair said Fennell actively engaged in preventing the bank from participating in discussions and proceedings related to the financial institution’s continued existence.

Mair also noted Fennell’s request for the receivership court to exonerate him from claims that might result from his acts or omissions as receiver, which the court granted.

The BoS appealed the Superior Court’s rulings granting Fennell full judicial immunity from possible lawsuits that may be filed against him. It also appealed the court’s ruling that the bank would indemnify Fennell from future claims in connection with his tenure of receivership. The appeal has been pending with the Supreme Court.

“Seeking and securing such an unprecedented pre-suit grant of immunity and indemnification is itself a breach of Fennell’s fiduciary duty as receiver because it placed Fennell’s interests above that of the bank and constitutes a wrongful attempt to protect Fennell from his own wrongdoing at the bank’s expense, contrary to the law and public policy,” Mair said.