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Monday, November 8, 2010

Audit shows no missing bank money after CEO's death in Michigan

A forensic audit on the operations of Community Central Bank following the disappearance of the institution's former CEO David Widlak found no missing money or irregularities.However, the Mount Clemens-based bank was ordered by state and federal regulators to comply with a lengthy list of corrective measures outlined in a consent order to strengthen the bank's financial condition.
In a statement released Friday afternoon, officials said the forensic analysis uncovered no unauthorized transactions by Widlak, who later turned up dead from a gunshot wound to the back of the head.
"We remain baffled and deeply saddened by the violent death of our friend and colleague," acting CEO Ray Colonius said in the statement.
Widlak, 62, of Grosse Pointe Farms, was reported missing on Sept. 20 after his car was found in the bank's parking lot and his office was in disarray. His body was found Oct. 17 by a pair of duck hunters in a marshy section of Lake St. Clair in Harrison Township.
After a pair of autopsies, a gunshot wound was found in the back of Widlak's head and a .38-caliber handgun he owned was found nearby in the muddy water.
The Macomb County Sheriff's Office and Macomb County Medical Examiner are working to complete their investigation into whether his death was a suicide or murder. A number of toxicology and ballistic tests will help make that determination.
In the days following his disappearance, the Macomb Daily reported Widlak had moved back to Michigan from Las Vegas because he had lost a lot of money gambling, raising speculation he was involved in illegal activity at the bank such as embezzlement.
But the audit, conducted by independent accountants Plante & Moran, PLLC, did not turn up any "unauthorized or problematic transactions, or any circumvention of internal controls on the part of Mr. Widlak," according to the bank's statement.
The statement also acknowledged Community Central Bank has been directed to a consent order with the Federal Deposit Insurance Corporation (FDIC) and the Michigan Office of Financial and Insurance Regulation (OFIR) to take steps to bolster the bank's standing.
Under terms of the consent order, effective Nov. 1, 2010, the bank has agreed to:
* Increase board oversight and conduct an independent study of management
* Improve regulatory capital ratios
* Charge-off certain classified assets
* Reduce its level of loan delinquencies and problem assets
* Limit lending to certain borrowers
* Revise lending and collection policies
* Adopt and implement new profit, strategic and liquidity plans
* Correct loan underwriting and credit administration deficiencies
In addition, the order must obtain prior regulatory approval before paying cash dividends or the appointment of any senior executive officers or directors.
Community Central Bank also is not allowed to accept brokered deposits without a waiver from the FDIC and must comply with certain deposit rate restrictions.
According to the statement, the consent order is the result of discussions regulators had with the bank earlier this year. It will remain in effect until it is changed or terminated by the FDIC or the OFIR.
In his statement, the bank's acting CEO said Community Central Bank like many commercial, real estate and business lenders in Michigan faces unprecedented challenges due to the economic downturn and the decline of values in real estate collateral in the bank's loan portfolio.
"The board and management are committed to doing everything possible to comply with the agreement," Colonius said in the statement.
Community Central Bank's financial situation has grown dark over the past year.
Recent quarterly reports show the lender lost $12.9 million in the first half of 2010, compared to $13 million for all of 2009.
Bauer Financial Inc., which rates banks nationwide on a five-star system based on financial documents, gave Community Central zero stars for the first and second quarters of 2010.
News of the forensic audit gave the bank's stock a mild uptick. It went from 52 cents a share on Thursday to 60 cents by the end of Friday.

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