Grand Rivers Community Bank says it has ‘been fully cooperating with federal criminal investigators’; Peoples National Bank says it has ‘not been advised of any investigation’ | Local News

HARRISBURG — Grand Rivers Community Bank, in a statement, says it is fully cooperating with federal criminal investigators and is aware of recent reports of a federal investigation into the underlying issues raised in the bank’s civil lawsuit in which it accuses Peoples National Bank and several of Peoples’ leaders of racketeering and fraud. 

Peoples National Bank and its affiliates, through their legal counsel, have denied any wrongdoing concerning the allegations made against them by Grand Rivers, and said they have no knowledge of a federal investigation. 

The statement Grand Rivers issued to the newspaper Thursday reads, in full:

“Grand Rivers Community Bank is aware of recent reports of a federal investigation by multiple agencies into the underlying issues raised in their lawsuit filed against Market Street Bancshares, Inc., Peoples National Bank, N.A., William F. Bonan, William F. Bonan II and Keith H. Botsch.”

“While Grand Rivers does not comment on pending litigation, the Bank, has, for some time, been fully cooperating with federal criminal investigators in their investigation of the issues, and intends to continue to do so.”

Brett Ashton, an Indianapolis-based attorney with Kreig DeVault LLP, which is representing Grand Rivers Community Bank, and Main Street Bancshares, Inc., the holding company for Grand Rivers, provided the statement to the newspaper via email. The statement lists as a contact Whitney Stringer, chair and CEO of Main Street Bancshares Inc. Though, Ashton indicated that no additional comments would be forthcoming from his client at this time. 

The statement followed the newspaper’s inquiry as to whether, and if so why, federal agents had visited a Grand Rivers’ branch earlier this week as there were citizen reports to The Southern that the branch had been closed to entry or exit for a period of time during normal business hours. The statement does not address that question specifically.

While vague, the statement references the civil lawsuit that Grand Rivers filed in federal court March 14 in Benton against Peoples National Bank and several of its leaders. 

In the lawsuit pending before the U.S. District Court-Southern District of Illinois, Grand Rivers Community Bank accuses Peoples National Bank and its leaders of gaining control of Grand Rivers for racketeering activities from August 2010 through the time the lawsuit was filed. 

In a response filed in federal court to the initial complaint, Peoples and its affiliates, through their attorneys, denied all wrongdoing alleged in the lawsuit. Additionally, they filed a counterclaim against Grand Rivers and a third-party complaint against another banking entity, Texas-based American Pacific Bancorp Inc., alleging breach of and interference with a contract agreement, respectively, for Grand Rivers to merge with and into Peoples National Bank.  

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One of the attorneys representing Peoples National Bank in the civil litigation, Christian Stevens, of St. Louis-based Armstrong Teasdale LLP, provided a statement in response to the one provided by Grand Rivers, which is printed below, in full: 

“Peoples National Bank has not been advised of any investigation of the issues raised in the civil lawsuit with Grand Rivers. Peoples National Bank has denied the issues raised in the civil lawsuit in court and has countersued Grand Rivers for breaching our signed merger agreement and its duties of good faith and fair dealing to Peoples National Bank.” 

In the originating lawsuit filed by Grand Rivers, the Grand Chain-based bank accuses Peoples National Bank, headquartered in Mount Vernon, and its named affiliates of “rampant self-dealing, preferential transactions, and improper transfer of low-quality assets from Peoples to Grand Rivers.” It further alleges that Peoples sought to acquire Grand Rivers in August 2015 for the purpose of concealing those activities.

Grand Rivers claims in the lawsuit that it only became aware of the illegal activities it alleges after a merger deal was finalized on Nov. 27, 2015.

Therefore, Grand Rivers claims that based on its allegations of Peoples “fraudulent concealment of the true purpose of the agreement,” that the merger agreement “is based entirely on fraud and is void.” The lawsuit also alleges that the board of directors of Grand Rivers was improperly constituted at the time of the merger, in violation of Illinois law and Grand Rivers’ bylaws.

The lawsuit specifically accuses Bonan II, former chairman of the Grand Rivers Community Bank and a current director of Peoples, of using the bank “as a personal account from which he could borrow unlimited amounts of money” and of engaging in a pattern of self-dealing to the benefit of himself, his friends and family members and a romantic partner in such a way that he weakened Grand Rivers’ financial position. 

Collectively, the lawsuit accuses the defendants of infiltrating Grand Rivers and its sole shareholder, Main Street Bancshares Inc., and managing them “for their own illegal purposes.”

Bonan II also is a past member of the Southern Illinois University Board of Trustees (he was appointed to the post in 2008 by former Gov. Rod Blagojevich), and either is or has been a key member of businesses associated with real estate, group health insurance and video gaming parlors, among other ventures. Bonan II also is the past Southern Illinois community bank president for Peoples’ Southern Region. 

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Concerning the accusations made by Grand Rivers against Peoples and its leaders, the lawsuit alleges five counts of civil violations of the Racketeer Influenced and Corrupt Organizations Act, more commonly known as the RICO Act. The 1970 RICO Act allows for both civil claims and criminal charges to be brought against alleged violators. 

The lawsuit between Grand Rivers and Peoples is a civil matter. While the statement by Grand Rivers indicates the bank is cooperating in an ongoing federal criminal investigation, the newspaper was unable, as of press time, to independently verify whether there is an ongoing federal investigation concerning the matters raised in the civil lawsuit, or into any other issues, related to either bank.

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It is common practice for spokespeople for federal investigatory agencies to neither confirm nor deny the existence of an ongoing investigation when no official charges have been filed, regardless of whether or not there is an active investigation. To date, no criminal charges have been filed in connection to the allegations raised in the civil lawsuit.

In Peoples National Bank’s answer to Grand Rivers’ complaint, in which they countersued, Peoples calls the lawsuit brought by Grand Rivers “nothing more than a transparent and futile attempt to escape Grand Rivers’ merger with and into Peoples to (a) pursue a more favorable deal and (b) avoid liability for breaching the terms of a merger agreement …”

“…this Court should not only reject Plaintiffs’ gamesmanship, but order specific performance of the terms of the merger agreement and compensate Defendants for the actual, consequential, and economic damages they incurred as the result of Plaintiffs’ unlawful conduct, including costs and attorneys’ fees, and any other relief the Court deems reasonable and appropriate,” Peoples’ countersuit further states. 

The third-party complaint by Peoples and its affiliates claims “American Pacific deliberately obstructed and interfered with defendants’ planned merger” of Grand Rivers. Peoples accuses American Pacific of acquiring Grand Rivers and funding Grand Rivers’ underlying lawsuit against Peoples in an attempt to ensure its improper acquisition attempt of Grand Rivers.

In addition to Peoples National Bank and Bonan II, the lawsuit names as defendants Market Street Bancshares, Peoples’ sole shareholder; the elder Bonan, of Mount Vernon, Bonan II’s father, who is the chairman, president and general counsel of Peoples and vice chairman of Market Street; and Botsch, of Carmi, a former member of Grand Rivers’ Executive Committee, a CPA who does accounting work for Grand Rivers, and a current director of Market Street and Peoples.

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The third-party complaint brought by Peoples claims that on Dec. 27, 2016, about a month prior to the goal closing date of the Grand Rivers merger with and into Peoples, American Pacific filed an application with the Federal Reserve to become a bank holding company by acquiring 67 percent of Main Street, indirectly acquiring Grand Rivers.

Peoples claims it did not learn about American Pacific’s application until the State of Illinois Department of Financial and Professional Regulation’s Division of Banking Bureau issued a regulatory report shortly thereafter. In that public report, the state indicated that it had received a change in control filing with respect to Grand Rivers. The newspaper has been unsuccessful in its attempts to reach American Pacific. Peoples also claims in its court response that it has reason to believe that American Pacific either is or has agreed to fund Grand Rivers’ lawsuit against Peoples. 

According to a spokesman for the Illinois Department of Financial and Professional Regulation, American Pacific withdrew its application to acquire Grand Rivers on April 18 — 11 days after Peoples filed its third-party complaint against American Pacific in the underlying lawsuit brought against it by Grand Rivers. 

IDFPR’s Banking Division would be charged with approving any merger deals because Grand Rivers Community Bank is a state bank, according to Terry Horstman, IDFPR’s spokesman. 

According to Peoples National Bank’s countersuit, IDFPR’s Banking Division had previously approved the merger of Grand Rivers with and into Peoples, and Peoples’ application for approval of the proposed merger was pending with the Office of the Comptroller of the Currency at the time Grand Rivers filed its lawsuit. 

Peoples National Bank is a nationally chartered member of the Federal Reserve System with branches in 15 Southern Illinois communities and two in Missouri; Grand Rivers is a state-chartered bank and a much smaller institution with branches in three locations — Grand Chain, Karnak and Shawneetown. 

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