Judgment upheld in bank collapse

BLUEFIELD - A federal appeals court has upheld a $161 millionjudgment against a financier whose loan scheme contributed to the1999 collapse of First National Bank of Keystone, the most expensivebank failure since the Great Depression.

The 4th U.S. Circuit Court of Appeals last week rejected the lateHarald Bakkebo's appeal of the December 2004 judgment. A U.S.District Court jury in Bluefield awarded the damages in a lawsuitfiled by the Federal Deposit Insurance Corp. as part of its bid torecover some of the $660 million the agency paid out as a result ofthe bank's collapse.

Bakkebo, 63, was fatally shot in April 2006 in his native Norway,where he had fled after being indicted in Louisiana in 1992 onunrelated federal fraud charges.

Bakkebo's appeal claimed that U.S. District Court Judge David A.Faber made several errors during the six-day trial, includingallowing the Louisiana charges to be admitted as evidence. Theappeal also said Bakkebo was responsible for only a small portion ofthe damages. Those claims were rejected by the appeals court inRichmond, Va.

The FDIC had alleged that Bakkebo took advantage ofunsophisticated bank officers who were themselves out to loot thebank.

Bakkebo and several coconspirators persuaded bank officials toinvest hundreds of millions of dollars in loan securitization, inwhich Keystone bought thousands of subprime home loans and thenresold the rights to most of the proceeds to investors, the appealscourt's ruling said.

The loans were mostly made to people who were at high risk fornot repaying their debts and the securitization program eventuallycollapsed.