FDIC settles with ABS vet on Keystone

The Federal Deposit Insurance Corp. has settled a civil complaint against Daniel Melgar, Sr. of San Francisco-based boutique firm Coast Partners for its association with the 1999 failure of First National Bank of Keystone, reported the Bluefield Daily Telegraph on Friday. 

According to the Telegraph, Melgar paid the FDIC $1.1 million. Melgar was unable to be reached for comment, and the FDIC has not yet returned a phone call seeking commentary.

In 2001, the regulator accused Coast Partners of helping Keystone -- once a small, regional deposit bank -- establish an elaborate, nationwide loan-purchase/securitization program, which -- through scandal and abuse -- ultimately brought the bank down.

Since the closure of the Keystone, former executives of the West Virginia bank have been convicted and found guilty of obstruction of justice and conspiracy to commit fraud, among other things. At one point, FBI agents found buried boxes full of bank documents on the ranch of the Keystone's senior vice president (see past coverage).

It is believed that Keystone, which securitized subprime home equity loans throughout the 1990s, was funding loan losses with FDIC-insured deposits and brokered CDs. The failure cost the FDIC close to $700 million.