George Bavelis, Sterling Bank's largest shareholder and the chief executive of its holding company, was full of optimism during the real estate boom.
The 76-year-old executive opened Sterling Bank's vaults to developers. Indeed, so strong was his belief in the real estate market that he personally borrowed more than $50 million from other banks to pursue his own investment and construction projects in Florida, Georgia and several Midwestern states.
Bavelis' optimism was misguided. He filed for bankruptcy protection in July 2010, just days before federal regulators shut down his Lantana-based bank.
State officials had repeatedly warned
Sterling that it was too heavily focused on development and residential construction loans, but top officials did not listen.
Among the bank's biggest mistakes were three loans to developers with past bankruptcies. It also lent money to one of Bavelis' business partners, and to one of the richest men in the island nation of Trinidad and Tobago.
Each of those loans wound up in default and cost Sterling millions.
In one misstep, Sterling lent money to Mahammad Qureshi, who partnered with Bavelis on various real estate projects around the country. Qureshi's companies borrowed more than $5 million from Sterling to finance gas stations in South Florida and defaulted on those loans.
In the case of Lawrence Duprey, the Trinidad and Tobago businessman, Sterling's loans seemed safe on the surface.
Duprey ran insurance, alcohol and petrochemical companies worth billions, and he borrowed $5 million to refinance a condo conversion in Fort Lauderdale.
Still, Duprey's deal should have raised questions, according to real estate experts. His plan was to turn 54 motel rooms into condos in 2007 — at a time when similar projects from Jacksonville to the Florida Keys were foundering.
Two years after receiving the loan from Sterling, Duprey's empire began to crumble. The Trinidad and Tobago government was forced to bail out his businesses, and his former insurance company sued him, saying he'd misappropriated assets to finance his real estate ventures.
Meanwhile, police in Trinidad and Tobago started a criminal investigation into why the insurance company failed, according to Caribbean news outlets. The police case and lawsuit remain pending.
"It's the downturn and the bubble that burst that hurt the company," Duprey told the Trinidad Guardian newspaper. "It's not mismanagement, or what I do or what anybody else did."
Bavelis did not return a message left with his attorney in New York.