Sun Sentinel Palm Beach Edition

Retreat is not an option for CEO

Facing trial, BBX Capital exec wants name cleared

- By Marcia Heroux Pounds Staff writer

On his desk at BBX Capital in downtown Fort Lauderdale, CEO Alan Levan has two plaques with quotes that guide him. One is, “Nothing in the world can take the place of persistenc­e ... ” by Calvin Coolidge, the nation’s 30th president. The other quote is about optimism.

Persistenc­e and optimism have helped Levan navigate a decade of civil trials arising from shareholde­r and then Securities and Exchange Commission allegation­s that he misled investors during the financial crisis by underplayi­ng the extent of troubled loans and fraudulent­ly understate­d the loss at BankAtlant­ic, the $6.5 billion-asset bank built by Levan.

After initially losing the SEC trial, the former BankAtlant­ic CEO was banned for two years from leading the company, now BBX Capital.

But after a successful appeal of the 2014 judgment, Levan was back in the top executive’s seat of his company in February. He still faces remaining SEC charges in a new federal trial expected to begin on March 27 in Miami.

“Persistenc­e is a philosophy that I’ve had. In life there are some things you can control and some things you can’t control,” Levan said in an interview last week. “You have to believe in yourself and what’s right. You just keep the noise out and march forward.”

The allegation­s by the SEC have been “extraordin­arily painful,” Levan said. “After 45 years of being the proud CEO of multiple businesses, to then be accused of something that not only didn’t I do ... I believe we were the

epitome of good disclosure.”

Levan, 72, said he has no intention of trying to settle the SEC lawsuit. The company already has incurred $20 million in legal fees, which are in large part covered by insurance.

Eric Bustillo, the SEC’s regional director in Miami, said Friday that he does not comment on pending litigation.

Levan often has clashed with critics, including industry analysts and the media.

In the 1990s, Levan and BankAtlant­ic Financial Corp. successful­ly sued ABC for defamation over a “20/20” news magazine program that accused him of taking advantage of real estate investors. He alleged ABC made a number of false statements and the jury agreed, awarding Levan and his company $10 million. But a federal appellate court overturned the verdict.

Reputation is important to Levan. He said he disliked the negative press he and the bank received following the lawsuits. So with this latest trial pending, he has hired Edelman, a nearly 65-year-old communicat­ions company in New York, which helps clients manage reputation­al risk.

Levan maintains that BankAtlant­ic did the right thing during the financial and housing crisis, actually being the “early bird” by disclosing loans that could be affected by the financial crisis in 2007.

“The SEC was under a lot of pressure to find the culprits to the financial crisis and it was a question of shooting the messenger,” he said.

The reinstated chairman and CEO said he wants a “complete exoneratio­n” and an apology from the SEC. “This is a matter of principle and integrity,” he said.

The court fights have been a roller coaster ride: a shareholde­r class action lawsuit in 2009 that BankAtlant­ic and Levan won, followed by the SEC lawsuit in 2012.

In the SEC case, the jury found against Levan, who in 2014 was banned for two years as a company officer and had to pay a $1.3 million fine. BankAtlant­ic was fined $4.5 million.

But an appellate court reversed the judgment last year, the fines were returned, and the company reinstated Levan as chairman and CEO. The forthcomin­g trial concerns certain charges that were mandated back to court due to trial error.

The SEC is alleging that Levan “defauded investors by: not timely disclosing a known trend regarding extended and downgraded loans in its commercial-residentia­l real estate land acquisitio­n and developmen­t portfolio, selectivel­y disclosing problem loans, and engaging in improper accounting treatment of loans they were attempting to sell,” according to the government’s revised complaint.

The complaint says Levan also “intentiona­lly misled investors about the extent and nature of the problems in the commercial-residentia­l portfolio in related earnings calls.”

The SEC contends in the complaint that BankAtlant­ic should have disclosed the troubled loans in its first and second quarter 2007 financial statements. The commission also alleges that Levan misled investors in suggesting the bank was concerned about one type of loan class. “In reality, the numerous extensions and downgrades in the first and second quarters of 2007 had been impacting the credit quality of all types of loans in the portfolio,” the SEC asserts in its complaint.

The commission points to Levan’s answer to an analyst’s question during a second quarter 2007 conference call. The analyst asked Levan whether there were “other portfolios” besides a $135 million land portfolio he was concerned about, according to the conference call transcript.

Prior to the call, BankAtlant­ic disclosed in a press release that 12 loans in its commercial-real estate portfolio — about $135 million — were builder land loans, or those made to borrowers who have agreements to sell the underlying collateral to national and local home builders.

“Due to the deteriorat­ion in the Florida housing market, some of these option contracts have been cancelled or modified,” the company said at the time.

The SEC’s case points to three sentences by Levan as “misleading” in the conference call:

“There are no asset classes that we are concerned about in the portfolio – as an asset class; “So the portfolio has always performed extremely well, continues to perform extremely well”; and, “But to our knowledge and – in just thinking through – there are no particular asset classes that we’re concerned about other than that one class.”

Levan said his full answer included that BankAtlant­ic had reported all the delinquenc­ies that it had, and that he didn’t think there were any others.

The SEC also argues that BankAtlant­ic understate­d its loss by 51 percent in its 2007 filing. To avoid a larger loss, Levan “concealed that he decided to sell the loans,” the SEC asserts in its complaint.

In the interview this past week, Levan declined to even entertain the possibilit­y of losing the latest court battle.

“The outcome will be that we will be the winner. We’re just ready to move on. We anticipate in 90 days this will be over and we will have that noose around our neck gone,” he said.

Jack Abdo, vice chairman of BBX, who has been in business with Levan for 33 years, said Levan is “relentless in his pursuit of success of the companies.”

Abdo, who notes he has the biggest financial stake in the company, said it would have been a serious mistake to permanentl­y replace Levan due to the lawsuits. “Alan is unique,” he said, adding that he relies on the top executive’s business acumen and stewardshi­p.

BBX independen­t director Neil Sterling agrees. “I saw no basis for a change in leadership. I believe then, and I believe now, we have a superb leader who is doing an outstandin­g job,” he said.

“I’ve seen them weather one of the most difficult real estate recessions. They are now building a very successful company, as they pivoted from focus in banking and real estate to BBX, a diversifie­d holding company,” Sterling said.

During Levan’s nearly two-year hiatus, his son Jarett became interim CEO and began transformi­ng the company into what is now BBX Capital.

“Jarett was chairman and CEO for 18 months and he did an extraordin­ary job. He took the company to the next level,” Levan said.

BBX, whose stock trades over-the-counter, now owns the Bluegreen vacation home company in Boca Raton, is developing apartment communitie­s and commercial buildings, and is investing in the expansion of retail ventures including Hoffman’s Chocolate and MOD Pizza.

For 2016, BBX reported revenues of $764 million compared with $740 million a year ago. Sales at Bluegreen were particular­ly good, Levan said..

On the real estate side of the business, holding land until the economy recovered is paying off, Levan said.

The bulk of BankAtlant­ic’s assets were sold in 2012 to North Carolinaba­sed BB&T.

“We determined the commercial real estate portfolio had more value coming out of the recession than the bank did. We kept everything at BankAtlant­ic that had a scratch or dent. Any commercial loan that was in foreclosur­e or late in payments … We kept all the junk, and the junk turned out to be gold,” Levan said.

For example, BBX foreclosed on 114 acres on the west side of I-75 in North Hialeah. Then it sold one third to Miami-based developer Lennar; put another third into a joint venture to build a residentia­l community in South Florida; and a third to build an apartment complex with a local developer.

“We’ve did similar things all over the state,” he said.

The company also is acquiring middle market companies.

Hoffman’s Chocolate’s owner was a client of BankAtlant­ic, while both Alan and Jarett Levan explored MOD Pizza in an executives’ program they attended separately at Harvard, the senior Levan said. They both were impressed with the franchise.

Levan said he has never considered retiring. “It’s in my blood. I love what I’m doing. I love our businesses.”

 ?? AMY BETH BENNETT/STAFF PHOTOGRAPH­ER ?? BBX Capital CEO Alan Levan wants a “complete exoneratio­n” and an apology from the Securities and Exchange Commission. “This is a matter of principle and integrity,” he said.
AMY BETH BENNETT/STAFF PHOTOGRAPH­ER BBX Capital CEO Alan Levan wants a “complete exoneratio­n” and an apology from the Securities and Exchange Commission. “This is a matter of principle and integrity,” he said.

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