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Federal Regulators Close Doors on Atlanta Based Silverton Bank,

 Stalling the Unfinished $23.7 million Landmark Hotel, Charlottesville, Virginia

The Daily Progress, Charlottesville, Va.McClatchy-Tribune Regional News

May 2, 2009--Federal regulators have shut down the Atlanta-based bank that is involved with the stalled Landmark Hotel project on the Downtown Mall.

The regulators closed the bank on Friday and set up a temporary government-controlled bank until a buyer can be found. It was the 30th bank failure this year in the United States.

The federal Office of the Comptroller of the Currency closed Silverton and appointed the Federal Deposit Insurance Corp. as receiver. Silverton Bank had about $4.1 billion in assets and $3.3 billion in deposits as of May 1.

Silverton was a type of institution known as a correspondent bank and did not take deposits directly from the public or make loans to consumers. It provided services to around 1,400 client banks, such as credit-card operations, investments and loan purchases. The FDIC estimated that the bank failure will cost its Deposit Insurance Fund at least $1.3 billion.

A Silverton subsidiary called Specialty Finance Group provided Internet entrepreneur Halsey Minor with a $23.7 million loan to construct a 100-room luxury boutique hotel on the Downtown Mall. The project, however, has come to a standstill in recent months.

Minor alleged last fall that the bank missed a $1.1 million payment on the construction loan, leading to delays and unpaid contractors. Soon thereafter, the bank said it was current on its payments.

More recently, the bank has filed suit against Minor, alleging that he is in default of the loan agreement. Minor, in turn, has sued Silverton Bank, as well as the project developer, Lee Danielson.

In a court filing, Minor said that he is worried that Silverton is planning to foreclose on the Landmark Hotel project, which he said would effectively kill the project's chances of being finished. In the meantime, the construction site has shut down until its fate is settled in court.

It was not immediately clear Friday how Silverton's troubles will affect the dormant hotel project in Charlottesville.


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