Last updated: February 19. 2013 6:24PM - 1009 Views

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WILKES-BARRE – The actions of a Dunmore-based bank caused problems with a multi-million dollar loan and a failed Mountain Top townhouse project, the Powell Law Group alleged in a recently filed lawsuit.

Allegations of negligence and conflicts of interest were detailed in the lawsuit filed last week by the Hazle Township law firm regarding a total of over $5 million in loans made by First National Community Bank, which at the time was controlled by businessman Louis DeNaples.

Attorneys Jane Sebelin and Brian Meuthing filed the suit on behalf of the Powell Law Group, owned by attorneys Robert Powell and Jill Moran.

The bank obtained judgments against Powell, Moran, and former judges Mark Ciavarella and Michael Conahan in February 2009 related to defaults on loans for the townhouse project formerly known as The Sanctuary in Wright Township.

Judgments ordering payments on the loans were entered in July 2011, but no payments have been made.

The Powell Law Group is currently appealing a county judge's ruling to the state Superior Court requiring the law firm to pay back the loans, and a denial of a request to have the payments stopped.

The lawsuit filed last week says the loans taken out by Powell and others were marred by conflicts of interest and other improper acts by the bank.

The bank's conduct with respect to the loans was unreasonable, inequitable and unsound from the time the loans were made continuing to the present, the suit says.

The suit alleges that Michael G. Cestone or a company owned by Cestone acted as the primary builder for the Big Kahuna, W-Cat project at a time when his father, Michael J. Cestone, was a director of the bank.

Cestone could not be reached for comment.

The suit also says the bank made the W-Cat loans contingent on using Cestone or a company controlled by Cestone as the primary builder for the W-Cat project.

The bank effectively forced Cestone on W-Cat and onto both sides of the transaction, the suit says.

After the bank sued Powell and Moran for defaulting on loans, the suit says, the bank incurred considerable expenses.

The collections (on the defaulted loans), however, have been virtually non-existent as a result of lack of available funds for Powell Law, Powell or Moran, the suit says.

The suit also alleges Conahan used his position as a director of the bank to improperly interfere with the management of the W-Cat project.

The suit alleges a breach of fiduciary duty since the bank had an overmastering influence and the borrowers justifiably placed dependence of trust on the bank.

The suit also claims the bank acted negligently because it failed to insist on an environmental review which would have disclosed potential environmental issues with the property … and disregarded complaints by the developers.

The law firm requests a jury trial as well as over $50,000 in damages.

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