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Court rules borrowers victims of Coast Bank

After being silenced during a hearing in Tampa federal court and having a subsequent motion abruptly denied, Sarasota attorney Alan Tannenbaum has won an appeal ruling for his clients who had mortgages through defunct Coast Bank of Bradenton.

Judges for the Eleventh Circuit Court of Appeals in Atlanta on Friday ruled that Tannenbaum’s clients are victims under the Crime Victims’ Rights Act.

Tannenbaum represents 114 borrowers who were left with mortgages on unfinished homes through a loan scheme involving a former Coast Bank executive who conspired with another to skim proceeds from an additional percentage point charged on mortgages.

Federal prosecutors have maintained that the former bank, rather than borrowers, is the sole victim of the crime because Philip Coon, a former loan executive at Coast Bank, denied the institution of honest services.

Coon split the proceeds with John Robert Miller, who owned a mortgage company. Both have pleaded guilty in the case and await sentencing.

Tannenbaum argued at Coon’s Nov. 5 plea hearing that borrowers were also victims because they were left with mortgages on unfinished homes.

However, a federal magistrate judge refused to hear Tannenbaum’s argument. A federal judge took just three days to deny a subsequent motion Tannenbaum filed to be heard on the matter.

In siding with Tannenbaum, judges for the appellate court wrote: “Under the plain language of the (Crime Victims’ Rights Act) statute, a party may qualify as a victim, even though it may not have been the target of a crime, as long as it suffers harm as a result of the crime’s commission.”

Tannenbaum was pleased by the decision and believes his clients deserve a portion of the $1.5 million in assets Coon must forfeit as part of his plea agreement.

“We’re very happy,” Tannenbaum said. “It really was the best possible result for the borrowers.”

Tannenbaum said he will now try to convince the court to let his clients’ claims take priority in the case.

“We’re going to contend that our restitution should be first,” Tannenbaum said. “We have to convince the court to put our restitution claims ahead of the government’s forfeiture claim and then we just have to show our damage. And that should really be as simple as putting the closing statement for each borrower before the government to show that each of our people had paid the point overcharge.”

Tramm Hudson, a local banking consultant who served as an adviser to Coast Bank during the loan debacle, was disappointed in the appellate court’s decision.

“Justice moves slowly,” Hudson said. “And I’m sure that when all the facts are heard it will be demonstrated that the bank was as much a victim of this rogue person as anyone.”

Coast Bank had $110 million in non-performing loans linked to 482 borrowers at the time it was forced to sell itself to Missouri-based First Bank last year.