First Priority Bank was the first to fail in Florida.

And its directors were among the first to be accused by federal regulators of "gross negligence" for the way the bank was managed, according to FDIC documents.

But First Priority's leaders avoided a lengthy and expensive lawsuit by having their insurance policy cover a $1.75 million settlement with the FDIC.

The bank was open less than five years, and in that time, regulators criticized it again and again for violating laws and regulations. That led to a 2009 federal law enforcement investigation into whether executives had tried to hide activities from regulatory scrutiny.

An assistant to chief executive George Najmy told a federal investigator that top officials withheld certain items from board minutes and had off-the-record meetings to make important decisions.

A Florida Department of Law Enforcement report released after an investigation into one of First Priority's borrowers also alleged that two customers had received inflated loans on the condition that the money be used to buy bank stock. Lending money to borrowers to buy bank stock is illegal in this state.

No one has been charged with a crime; the investigation was ultimately dropped.

The allegation "is absolutely, unequivocally not true," said Alan Zirkelbach, First Priority's former chairman.

During exams, regulators also questioned insider loans to Zirkelbach and the bank's relationship with his construction company.

Regulators pointed out that the bank paid Zirkelbach Construction more than $3.5 million to build or refurbish five branches, to prepare vacant land for future branches, and to build an office in Tampa.

The Florida Office of Financial Regulation said Zirkelbach got a $250,000 loan from the bank, twice the amount allowed.

"The extent of Chairman Zirkelbach's involvement in many of the bank's past construction projects gives rise to concern of undue influence and/or conflict of interest," OFR regulators noted in a September 2007 examination.

Zirkelbach said he lost far more when First Priority went under than he ever made from the work he did on some of the bank's buildings.

"I wanted the bank to succeed," he said. "I did the work for way under cost."

Zirkelbach said First Priority failed because he and other executives followed the herd during the real estate boom. Though he acknowledges that regulators warned them to slow down, there was pressure to keep growing and increasing profits.

"I'm not a banker," Zirkelbach said. "I lost a ton of money."

Read other Herald-Tribune stories here and here.

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