Banker Backlash: A California Builder Sues After His Lender Pulls the Plug

A security breach

Eliopulos quickly learned that the lender had included his notes in a portfolio of recourse loans, and hired EastDil Secured, a real estate investment banking company, to sell the portfolio. Pre-qualified buyers signed a confidentiality agreement, promising not to talk to Eliopulos.

They then received a password to a secure Web site that contained a sales brochure on the portfolio of loans. To his horror, he also learned that since he had secured the loans with personal guaranties, prospective buyers had access to his detailed financial information, including his tax returns, his bank account numbers, and even his children's social security numbers.

"I owe the bank $27 million; I had to give the bank hundreds of pages about me being a credit-worthy borrower," he says. "And yet, someone signs one page saying they can qualify for a loan and gets 2,000-plus pages about Joshua Ranch. There's all my financials. My pants are at my ankles."

Through his attorney, he demanded that EastDil Secured remove his personal financial information from the Internet. They refused, saying they were only doing what their client, IndyMac Bank, had instructed them to do. A person familiar with the process of selling loan portfolios told BuilderOnline.com that it is standard industry procedure to include financial information on loans secured with personal guaranties, and that the information was on a secure, password-protected Web site.

Not long after the documents were released, Eliopolus got a panicked phone call from the Lancaster, Calif., branch of American Security Bank. Someone had tried to transfer $2 million dollars out of his bank account.

The person had initially called the branch farthest from his home and identified himself as Andrew Eliopulos. The employee noticed that he was a large customer and referred him to his home branch. When he called the Lancaster branch, he got operations officer Kathy Conely. As soon as she heard the voice, a monotone that was nothing like the friendly, outgoing person she has known for a decade, she says she knew something was wrong and confronted him.

"It was obvious it wasn't Andrew," Conely says. "Even if he's busy, he's a gregarious, fun-loving guy. … I said, "This isn't my Andrew. Who is this?" and he hung up." She immediately called Eliopulos, who called the police and started the process of closing accounts.

"I've never been compromised in business," he says. "Never. It doesn't take a brain surgeon to figure it out."

His attorney sent a cease and desist letter to IndyMac's attorney, he says. They declined to remove his personal financial information from the site.

On May 20, Eliopulos filed suit in Los Angeles Superior Court against IndyMac and EastDil Secured, alleging invasion of privacy, negligence, and intentional infliction of emotional distress in the release of his financial information.

Martha Wallau, chief operating officer for EastDil Secured, confirmed that IndyMac Bank hired the company to sell its portfolio of recourse loans and that prospective buyers were pre-qualified by the bank and signed a confidentiality agreement. She declined to comment on the litigation.

In the same suit, Eliopulos claimed that IndyMac engaged in unfair business practices, and breached its fiduciary duty and an implied covenant of good faith and fair dealing by delaying the project and refusing to continue funding it.

In June, Eliopulos attended the Pacific Coast Builders Conference in San Francisco and heard about a new group, the Homebuilders' Coalition for Responsible Bank Behavior. For the first time, he saw how widespread the problem was – there were at least 40 other builders facing similar situations.

"It's wrong what (the banks) are doing," he says. "Look at the people who get hurt. It's not just builders. It's engineers, surveyors, framers, concrete guys. Cities get left with blighted properties and don't get the fees they were expecting. It's a big domino effect that winds up destroying communities. … I was rotating $5 million a month in and out of our operations. I was feeding a lot of families. And I'm small in the scheme of things. There are much bigger companies in the same situation."

The feds step in

On July 11, the Office of Thrift Supervision closed the financially strapped IndyMac Bank, and appointed the Federal Deposit Insurance Corporation as its conservator. With that change in management, Eliopulos finally found a receptive ear to his request to have his personal financial information taken off the Internet – more than four months after he first requested its removal.

But he continues to battle the fallout from the bank's confidentiality agreement, which has prevented interested buyers of Joshua Ranch from talking to him.

"There is a guy who wants the project; he needs to talk to me to get his arms around it," Eliopulos says. "My attorney has asked IndyMac to unwind the confidentiality agreement so he can get educated and make a very clear offer to purchase. They won't allow it.

"They are taking people out of the game; that's blasphemy," he says. "It's a discredit to taxpayers and FDIC. If they're going to liquidate assets, they need to allow people to come talk to me. We have a ready, willing, and able buyer who wants to make an offer to purchase, and this bank will not allow him to talk to me."

With the FDIC takeover of IndyMac, Eliopulos' lawsuit has been delayed. An initial hearing, originally scheduled for Aug. 18, has been rescheduled for Oct. 1. But for all practical purposes, his career as a home builder – at least for now -- is finished. He has closed the business he and his father started together.

"I don't have a company anymore; I had to shut it down," he says. "I'm trying to hold my head high in a community I've lived in for years because my bank lied to me."

Moving on

These days, Eliopulos tries to concentrate on what is most important to him. He has his family, his faith, and his health. He can find joy in watching his 6-year-old son earn a new belt in karate, and in seeing his 4-year-old daughter show off the dance steps she's learning at Greek school. He knows that he has the skills and experience to be successful again in home building and is working toward that goal.

But there are times when he wonders how it all came to this.

"What gets me is these banks are so vicious, messing with people's heads," he says. "All the big banks are doing it – all of them. They sit down and manipulate you and coerce you to do things, and when they can't get anymore, then they turn the knife. If they want to take me, take me out. It was a family-owned company – my mother, my wife, and me. You want my house? You want my mom's house? Where does it end? This is a dark side of this country I never knew existed, but it's there. I have to tell you, my father fought in the Second World War with Patton. I know he didn't fight for this kind of stuff."