By JENNIFER RICH
MANATEE -- The borrowers who lost money in the fraud and money laundering case involving the former Coast Bank and its executive Phil Coon won’t see any restitution money, a court has ruled.
The 11th Circuit Court of Appeals in Atlanta ruled that although Coon and co-conspirator John Miller, president of American Mortgage Link, had taken an extra 1 percent fee in making loans to borrowers purchasing lots and homes, no restitution is due.
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Borrowers were aware that the bank would deduct a broker’s fee in the sales along with other administrative costs and give the builders the balance, the court said in its May 25 ruling.
“The cause of petitioners’ loss is therefore not Coon but the fact that the builders became insolvent and were unable or unwilling to complete their work,” the court said. The borrowers assumed the risk that the builder could walk away and they would be liable, the ruling stated.
Coon, who pleaded guilty to federal charges of fraud and money laundering by illegally pocketing $1.2 million, will be sentenced at 2 p.m. July 6 along with Miller. Sentencing for Coon, the former executive vice president, who has since moved to Long Island, N.Y., had been held up until the restitution issue was settled.
Alan Tannenbaum, the Sarasota attorney representing 152 of the 482 borrowers whose homes were left in limbo after the primary builder, St. Petersburg-based developer Construction Compliance Inc., ran out of money to finish construction, said he would not appeal the ruling.
“It is hard to believe that it took the court nearly a year to issue an opinion so thin in substance,” he said. “Curiously, the court makes no mention of its earlier ruling in favor of the borrowers.”
But Tannenbaum said he plans to push for the maximum five-year sentence for both Coon and Miller to appease his clients.
“It’s been a long road for these folks. Many still own bare lots and half-completed houses,” he said.
Borrowers, who were notified of the ruling by email this week, are exploring the possibility of petitioning the U.S. Attorney General for a portion of the assets being forfeited to the government as part of Coon’s plea deal, Tannenbaum said.
James Felman, a Tampa attorney representing Coon, said he was very pleased with the court ruling.
“We feel quite vindicated,” he said. “It is always satisfying to prevail in court. This has taken a very long time; it’s taken a toll on Mr. Coon. He’s looking forward to putting the matter behind him.”
The case against Coon has stretched for years. In February 2007, Coon and his wife, Melissa Beebee, a loan processor at the bank, were fired after the bank began an investigation into $110 million in questionable loans.
CCI was the primary builder for the homes, and the deals were marketed across the country during Florida’s housing boom. Potential homebuyers were told that a mortgage broker and bank were part of the package deals and that buyers could make substantial money on their investments.
But when the housing market turned sour, investors found themselves with vacant lots or partially completed homes, a bankrupt builder and no buyers.
First Bank bought the failing Coast Bank in November 2007 and Coon plead guilty in October 2008. In July 2009, the 11th Circuit Court of Appeals gave borrowers the opportunity to file restitution claims.
Tannenbaum, who took the case on a contingency fee basis, questions the joint effort by the federal prosecutors and Coon’s defense attorney to fight borrowers efforts to retrieve money they lost.
“They made the bank the victim of the crime because the bank is defunct. So the government gets to keep all the money. It’s a very convenient arrangement,” Tannenbaum said. “If this were a multiple victims crime, the sentence would be higher.”
Coon, along with his family, also faces a civil suit in Manatee County that claims he helped financially exploit an elderly Bradenton woman.
Coon, his wife, sister and the estate of his late mother are named as defendants and charged with conspiring to take more than $77,000 from an incapacitated family friend, claims the friend’s daughter, Mary Ann Watson, in the suit. It also accuses Coon and his family of hiding assets in violation of his plea agreement with federal prosecutors.