The Federal Deposit Insurance Corp. has filed suit in federal court in Los Angeles seeking $4 million in damages from 11 former officers and directors of Capistrano National Bank.
The FDIC seized control of the bank in April, 1985 after Capistrano National lost $4.1 million in 1984. The government later sold Capistrano's assets to Farmers and Merchants Bank of Long Beach for $3.05 million.
The lawsuit contends that the bank's management failed to respond to FDIC orders to hire a capable loan officer, review its lending policies and maintain credit limits. Instead, the board continued "an aggressive lending policy to generate growth," the suit alleges.
Capistrano, which had four Orange County branches before it was closed, opened in San Juan Capistrano in 1975 and later moved its headquarters to Santa Ana. It grew to $50 million in assets in 1981, but had losses of $2.4 million in 1982 and $1.3 million in 1983, according to the FDIC.
Among the defendants named are former chief executive Rostem Pirasteh--who was once finance minister of Iran--and the estate of the late Philip Stearns, a Newport Beach developer and chairman of the bank.