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Feds investigate lending by failed Sonoma bank

  • San Rafael developer Bijan Madjlessi, shown with his wife, Biganeh, is a target of a federal criminal investigation looking into the collapse of Sonoma Valley Bank, according to court records and sources familiar with the probe.

A federal grand jury is sifting through the collapse of Sonoma Valley Bank and its use of taxpayer bailout money, part of a criminal probe examining loans the bank made to one of its largest borrowers.

The bank, which imploded 11 months ago amid overwhelming loan losses, was only the fifth bank in the nation to fail after receiving an infusion of money through the federal bank bailout program.

A government agency created by Congress to examine misuse of bailout money has interviewed at least a half-dozen former bank employees. Most of the questions have focused on Marin County developer Bijan Madjlessi and his relationship with the bank and its senior management, said a former bank employee, who spoke on condition of anonymity.

The far-reaching criminal investigation, which includes agents from the FBI and Internal Revenue Service, is also exploring personal financial ties between Madjlessi's wife and one of the bank's loan officers, according to sources close to the case.

The full extent of the probe remains closely guarded while investigators work with the U.S. Attorney's Office to present evidence to a grand jury that has been meeting in U.S. District Court in San Francisco.

The grand jury ultimately will decide whether anyone should be indicted on criminal charges. No criminal charges have been filed.

The bank repeatedly broke standard lending rules in its dealings with Madjlessi, his companies, his employees and his business associates, The Press Democrat discovered in public records, private documents and interviews with dozens of former employees, borrowers, investors, analysts and other banking executives.

“There is no question there was a violation of standard bank lending practices,” said Fred Ptucha, a local banking analyst with Financial West Group in Santa Rosa. “Whether they broke any laws, well, that remains to be seen.”

Loans to Madjlessi were arranged by a bank officer who had a personal financial relationship with the developer's wife, according to documents obtained by The Press Democrat.

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