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Founder of Failed Dairy Sues Community Development Bank

May 03, 2000|LEE ROMNEY | TIMES STAFF WRITER

The founder of a South-Central dairy processing plant sued the Los Angeles Community Development Bank on Tuesday, alleging that it improperly meddled in his business, caused his ouster and ruined the company.

The lawsuit was filed in Los Angeles County Superior Court by Kevin Copeland, whose Copeland Beverage Group received one of the bank's earliest loans but became its greatest embarrassment when the deal soured, costing taxpayers $20 million.

According to the lawsuit, the bank interfered with Copeland's business by selecting its board of directors, specifying which senior executives would operate the company, requiring that company bylaws be amended to further the bank's own interests and otherwise controlling day-to-day operations.

The bank also became the controlling majority shareholder, while Copeland and his wife lost their voting rights. Then its hand-picked board members fired Copeland, the lawsuit alleges.

After the ouster, the lawsuit alleges, the bank continued to manage the plant but was not able to make it profitable, in part because it did not have access to the minority contracts that Copeland--who is African American--would have.

Copeland's attorney, David J. Cowan, said the bank's involvement with the business makes it legally responsible for the outcome of those actions, a concept known as lender liability.

Copeland is seeking damages for lost earnings, lost value of his stock, loss of reputation and punitive damages.

Bank CEO William H. Chu called the claims "legally invalid and factually inaccurate" and said the bank will "vigorously defend its actions."

The bank made its first loan to the company in 1997 for $6 million. It grew to $10 million by the time Copeland was fired, then ballooned to $24 million--violating the bank's limit--before souring last August. The bank has since recovered about $4 million in assets.

The lawsuit is the fourth filed by borrowers against the lender, the federal government's largest response to the 1992 riots. A recent trial in one case resulted in a $7.2-million judgment against the bank, which has vowed to appeal.

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