Friday, August 20, 2010

Failed ShoreBank's Mauritius PEU

Shorebank, a large community oriented bank failed. The FDIC press release stated:

The FDIC entered into a purchase and assumption agreement with Urban Partnership Bank, Chicago, Illinois, a newly-chartered institution, to assume all of the deposits of ShoreBank.
The newly chartered institution is backed by Wall Street firms and large foundations. The FDIC will subsidize the buyout:

The FDIC and Urban Partnership Bank entered into a loss-share transaction on $1.41 billion of ShoreBank's assets. Urban Partnership Bank will share in the losses on the asset pools covered under the loss-share agreement.

Goldman Sachs, JP Morgan, Morgan Stanley, Wells Fargo et al will get a $368 million subsidy from the FDIC. Wall Street's latest run on the government is galling in and of itself.

However, in looking for SEC filings on Urban Partnership Bank or ShoreBank, I found a ShoreCap II Ltd., a private equity fund incorporated in Mauritius. Minimum investment is $250,000 for the $55.5 million fund. It's address is:

2230 S. Michigan Avenue
Suite 200
Chicago, IL 60616

A number of Shorebank subsidiaries share this address:

Center for Financial Services Innovation-the nation’s leading authority on financial services for underbanked consumers.

National Community Investment Fund-an independent charitable trust advised by ShoreBank Corporation that invests in banks, thrifts, and credit unions that generate both financial and social returns.

ShoreBank International Ltd.- the for-profit international advisory subsidiary of ShoreBank Corporation. ShoreBank International does not conduct banking operations but rather offers a broad range of advisory and financial services in its core communities of practice - small business finance, microfinance and housing finance.

ShoreCap Exchange Corporation-a nonprofit capacity building company supporting financial institutions in the development finance field.

ShoreBank, the defunct institution, uses the same street address with no suite number.

Let's be clear, private equity is never mentioned by ShoreBank or its subsidiaries. Mauritius did not make ShoreCap International's client list. Yet, a $55.5 million Mauritius-based private equity fund was launched from ShoreBank's offices. The private equity fund's President, Franklin Kennedy, is a ShoreBank executive.

I smell a private equity underwriter (PEU). Given ShoreCap II's three notice of exempt offerings, does Chicago have an Ugland House? Oddly, ShoreCap International is incorporated in the Cayman Islands.

Aside: Ellen Seidman, ShoreBank Executive Vice President, joined the failed bank in June 2010. She recently appeared at Tim Geithner's confab on housing finance reform. MarketWatch quoted her hours before the FDIC announcement. I take it Ms. Seidman is one of the retained executives that had nothing to do with ShoreBank's implosion. Did she go there knowing that? Seidman is now officially aligned with Wall Street interests.