Mr. Bullard

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 NewsBank InfoWeb
St. Petersburg Times

July 14, 1991
 
Bank failure has Bullard in trouble with officials
 
ByJOHN CRADDOCK JOHN D. MCKINNON DAVID DAHL
 
Section: BUSINESS Edition: CITY Page: 1I Estimated Printed Pages: 6
 
Index Terms: lead bank finance asset biography probe Fred Bullard Florida State Bank
 
Article Text:
 
Fred Bullard, a St. Petersburg real estate developer by trade,  became best known in Florida as the good-time owner of the  Jacksonville Bulls football team in the old United States Football  League.
 
Bullard, whose nickname is ""Bubba,'' invested more than  $6-million in a franchise that eventually went kaput.
 
On the heels of the Bulls' demise in 1986, Bullard set his sights on a bank  the Holiday Bank in Pasco County, which in 1989 changed its name to Florida State Bank.
 
Bullard now compares his investment in the Bulls and the bank this way: ""They were both equally stupid.''
 
The bank collapsed on May 24, largely because of a series of loans to and investments with real estate subsidiaries that Bullard also controlled.
 
While the football venture at least leaves some happy locker room memories, the bank of Bubba could prove to be an investment with serious penalties for Bullard and the people who served on the bank's board of directors.
 
One of them is U.S. Rep. Michael Bilirakis, R-New Port Richey.
 
Bilirakis is in an awkward position. When a bank goes broke, the federal government has to pick up the bank's bad loans and failed real estate projects.
 
The government sells off what it can, but the Federal Deposit Insurance Corp. pays for the difference between the amount of the bad loans and what the property is really worth.
 
After the recent rash of bank and savings and loan failures nationwide, that loss has run up to the $100-billion mark  and it's growing. That's why members of Congress have spent months crafting bills to prevent the further collapse of the banking industry and have held hearings to identify the culprits behind the failures.
 
In turn, federal regulatory agencies, teeth bared, have gone after some of those in charge of banks and S&Ls by filing civil suits. Sometimes they even press for criminal prosecutions.
 
Federal officials are now looking to see whether they can recover money from the officers and members of the board at the old Holiday Bank.
 
""We're going to investigate. It's routine,'' says John O'Donnell, a liquidator for the FDIC in Orlando. ""If there is (evidence of) criminal activity, we refer it to the FBI.''
 
The cost of the bank failure to the FDIC?
 
Estimates vary at this stage as the FDIC plows through paperwork left behind at the bank. But $25-million strikes officials as a good early estimate.
 
Regulators such as Terry Straub, director of the state Division of Banking, don't put Bullard  who was the bank's chairman  the category of CenTrust savings and loan scoundrel David Paul.
 
But as early as July 31, 1989, they cited the bank for ""unsafe or unsound'' practices that eventually led to its ruin. The FDIC issued a cease-and-desist order that told the bank to stop making real estate loans and to cut back on the loans to directors.
 
It seems that Fred Bullard, the banker, was lending money to and making investments with companies controlled by Fred Bullard, the developer.
 
""That's the succinct way of putting it. That's what happened,'' says Straub.
 
And while there is nothing on the face of the arrangement that is illegal, poor investments in real estate sank the bank, says Straub.
 
The bank was run ""counter to good business practices,'' Bullard concedes.
 
How poor those business practices were will determine whether the FDIC presses a lawsuit to recover money. When the FDIC concludes that there was ""gross negligence'' by a bank, it generally sues, says FDIC spokesman David Barr.
 
Bilirakis resigned from the board 10 months before the bank failed, but he could still be liable for damages if the FDIC can make a case.
 
If it comes to a lawsuit, the congressman says, ""I guess we'll suffer with everybody else.''
 
A 15-yard penalty
 
The Holiday Bank was touched by controversy almost from its inception.
 
It had been in operation for less than two years when in 1974 its records were subpoenaed during a highly publicized investigation of bank charters issued by then-state Comptroller Fred O. ""Bud'' Dickinson.
 
The bank was purchased in 1979 by Metropolitan Bank in Tampa. That bank was seized by regulators in 1982 when it failed amid charges of criminal activity, but the Holiday Bank was not affected.
 
The Pasco bank eventually became Bullard's in 1986 when he bought the controlling interest.
 
By then, Bullard had already made a name for himself in sports and business. Bullard, the son of a tree farmer from tiny Macclenny near Jacksonville, put himself through the University of Florida by building cabinets.
 
He became one of the most successful real estate developers in Florida. Feather Sound in St. Petersburg's Gateway area is his handiwork. He married a local television personality, Karol Kelly, and they live in a mansion in Feather Sound and own his and hers Rolls-Royces.
 
Bullard returned to his native Jacksonville in 1983 to take control of the Bulls football team and quickly won the hearts of fans there. There was even a ""Bubba's Buddies Section'' in the stands. The excitable Bullard once ran onto the field to argue with officials  and his team was hit with a 15-yard penalty.
 
Several years later, he ran afoul of officials in the banking arena, too.
 
At least until Bullard stepped in, the Holiday Bank had been a ""ho-hum'' operation, according to Straub, the state regulator.
 
The bank weighed heavily into real estate lending and investing, says Paul Wysock, a New Port Richey veterinarian who was a board member from the bank's inception until its collapse.
 
""There's not much industry up here (in Pasco),'' he says. ""If you make loans, you make real estate loans.''
 
As a banker, Bullard hoped to use his development expertise to an advantage.
 
""You think you can make it all work,'' he says.
 
Bilirakis joined the board in 1988. ""Mr. Bullard called me and asked me,'' he says.
 
Though Congress routinely considers banking legislation, it is not unheard of for members of Congress to serve on the boards of financial institutions. Bilirakis does not serve on the House Banking Committee, although he does serve on the Energy and Commerce Committee, which is scheduled to take up bank reform this month.
 
Bilirakis says he asked other members of Congress if the board seat would present a conflict. They said no. ""I saw nothing wrong with it,'' he says.
 
The congressman does note, however, that when a small bank is controlled by a single person, ""checks and balances could be a little bit of a problem.''
 
Bilirakis calls the bank ""Mr. Bullard's bank.'' And under Bullard's control, the bank's real estate portfolio ballooned. Soon after, real estate loans started going sour. Real estate loans that weren't paying interest to the bank multiplied.
 
For example, in 1986, the total amount of real estate loans not paying interest to the bank was $327,000. By the end of 1988, the figure was $3,413,000.
 
At the same time, investments in real estate went from zero in 1987 to $8.29-million in 1989.
 
Bullard recites the litany of promising deals gone bad:
 
Gulf Island Properties  condominiums in Bradenton on which the bank's exposure was $2.5-million. The project was never fully finished, says Bullard.
 
Keystone/Crenshaw  vacant property at Keystone and East Lake roads in North Pinellas County. Bullard says the denial of a zoning request left him hanging. The bank's exposure: $3.9-million.
 
The Clas Ritz of Ocala  a historic hotel, now closed, in Ocala that relied on tax breaks. The bank's exposure: $1.2-million.
 
Also cited by federal bank examiners were questionable loans to Bullard-controlled companies, such as Gateway Equities for $3.4-million and Equity Sound Builders for $2-million.
 
By July 31, 1989, federal regulators had seen enough. They slapped the bank with the cease and desist order.
 
Bilirakis says the order almost came as a relief because it brought the bank's problems into full view. ""It bothered all of us (board members),'' he says.
 
The federal order specifically cites loans to directors and sets a schedule to cut back the loan amounts.
 
Bullard was the chief beneficiary of the loans. But Bilirakis also had a mortgage loan  on a office building in Holiday for between $50,000 and $100,000. The loan is paid up to date, he says.
 
The federal order came as the real estate market was going into a slump, a slump that left the bank with little chance of success.
 
Straub says regulators can issue orders, but if the bank is in too deep, the order only stops more bleeding. ""It doesn't change the market,'' he says.
 
But Bullard says officials threw their penalty flags too early. ""The regulators cut us off,'' he says. ""The real estate projects were stopped cold.''
 
Bilirakis says he made no effort to intervene with regulators as the bank's problems mounted. By this time, he says, he was ready to leave the board.
 
His resignation in July 1990 came on the heels of a tough FDIC examination of the bank that was released to the board on June 25. However, Bilirakis says he wasn't aware of the examiners' report and didn't attend any board meetings in 1990.
 
After Bilirakis left, Bullard, ever the entrepreneur, had his own personal bailout plan to save the bank. He embarked on two deals, but neither came through as planned.
 
One was to sell a shopping center in Sarasota for $18-million. Bullard says the shopping center was collateral for his loans at the bank. He says he also planned to use some of the profits of the sale to recapitalize the bank.
 
But the financing for the shopping center sale was coming from probably the shakiest bank in America at the time  the Bank of New England.
 
The deal fell through when the Bank of New England failed in January, and the shopping center was sold at a loss.
 
The second deal involved selling a development known as Queens Harbor Yacht and Country Club in Jacksonville, said Straub. It also came to naught.
 
There was no more money to prop up the bank, and Bullard had run out of ideas.
 
Two months ago, regulators stepped in. The bank was taken over by tiny Orange Bank of Ocoee, near Orlando. The bank assumed the deposits and some of the assets. But there still are about $68-million in loans and investments on which the FDIC will try to recover what it can.
 
Bilirakis notes that depositors didn't lose any money. ""I'm happy about that,'' he says.
 
However, as to the extent of loss  about $25-million  that the FDIC will have to cover, Bilirakis expresses shock: ""I'm surprised (at that number).''
 
Bilirakis, a self-described optimist, says that if the government regulators are patient the real estate will eventually pay off.
 
""I understand the market is turning around,'' he says.
 
But don't tell that to Fred Bullard. He now refers to his old bank as ""the tar baby.''
 
""This is a tough time for banking and real estate,'' he says.
 
Along with football, those are losing games he knows a lot about.
 
Times staff writers John D. McKinnon and David Dahl contributed to this report.
 
Caption: Fred Bullard at Feather Sound in the '80s U.S. Rep. Michael Bilirakis Florida State Bank in Pasco County was called Holiday Bank  when it was acquired by Fred Bullard, but changed its name in 1989 Team owner Fred Bullard took an active role in his USFL  Jacksonville Bulls. Here, in 1984, he stormed onto the field to  protest an official's call One of the bank's bad loans was on this property at Keystone  and East Lake roads in North Pinellas County The bank's exposure on The Clas Ritz of Ocala was  $1.2-million. The historic hotel, which relied on tax breaks to  survive, is now closed COLOR PHOTO, Times files, (2) COLOR PHOTO,  Scott Keeler BLACK AND WHITE PHOTO, Times files BLACK AND WHITE PHOTO, JIM DAMASKE BLACK AND WHITE PHOTO, RON THOMPSON
 
Record Number: 179


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