FAIRHOPE, Alabama—The Federal Deposit Insurance Corp. has sued Robert I. Gulledge, former head of the Alabama Banking Department and CEO of Citizens Bank in Robertsdale, and 16 other board directors and top executives of the Atlanta-based Silverton Bank for $71 million in damages from the largest bank failure in Georgia history.

Filed Aug. 22 in Atlanta, the federal lawsuit paints a picture, not only of experienced bankers approving risky loans during the rapidly deteriorating real estate and financial markets of 2007 and 2008, but also approving the building of a $35 million headquarters, buying two corporate aircraft and throwing lavish executive retreats at places like the Ritz-Carlton at Amelia Island, Fla., during that time.

“This case presents a textbook example of officers and directors of a financial institution being asleep at the wheel and robotically voting for approval of transactions without exercising any business judgment in doing so,” the 102-page complaint states. “What makes this case so unique and troubling is that Silverton’s board was not comprised of ordinary businessmen,” but rather “CEO’s and presidents of community banks, which was a requirement to serve on the board.”

The allegations against the directors and officers include gross negligence, breaches of fiduciary duty and waste that resulted in the $71 million of losses to the bank and its ultimate failure in 2009, which cost the FDIC $386 million.

Silverton began as a state-chartered “banker’s bank” in 1986, which provides financial services to community banks and is owned by investor banks but does not provide services to the general public. The bank received a national charter in 2007, which allowed it to accelerate its growth.

“Silverton’s aggressive expansion plan was accompanied by significant weaknesses in loan underwriting, credit administration, and a complete disregard of a declining economy,” the lawsuit alleges. “Ultimately this led to the failure of the bank.”

From 1971 to 1973, Gulledge was superintendent of the Alabama Banking Department, the top position at the state agency that charters, regulates and examines banks and trust companies chartered by the state. The agency also has regulatory and licensing authority over lenders, mortgage brokers, payday lenders and pawnshops conducting business in Alabama, according to the agency’s website.

Former president and CEO of Citizens Bank in Roberstdale, he helped found that Alabama bank in 1981, which now has offices in Fairhope, Foley and Loxley.

As a community bank executive, Gulledge was authorized to be a member of Silverton’s board of directors, where he served on its executive loan committee from about 2005 to 2007.

He left Citizens Bank in about 2008 and is no longer employed there, according to bank staff.

Gulledge could not be reached for comment by deadline.

Silverton was declared insolvent in 2009 and is on the receiving end of a host of other lawsuits connected to its financial collapse and alleged mismanagement by directors and top executives.

Editor's note: Related story will be posted later today and updates as they become available.