PRETEND AND EXTEND:

ONE BUILDER, SIX BROKEN BANKS

James Bovino is a bank killer.

His companies defaulted on more than $300 million in loans and contributed to the failure of six banks across the country during the Great Recession â€” including three in Southwest Florida.

The son of a janitor, Bovino rose to become chairman of his own bank and a prominent New Jersey developer with two dozen multimillion-dollar projects under his belt.

Business associates say he prided himself on being a family man. He once told The New York Times that he watched only G-rated movies and had fired people for swearing in the workplace.

But his squeaky-clean exterior did not stop him from using strong-arm tactics â€” hiring a disbarred attorney with ties to organized crime â€” to get what he wanted in the combative world of New Jersey development. When the economy slid into recession, former associates say Bovino diverted bank funds meant to pay subcontractors, and regulatory documents and a government lawsuit show he participated in "improper" deals that broke bank policies, hiding the fact that he was no longer current on his loans.

Bovino, 71, is not accused of any crimes.

The developer did not return three calls left on his answering machine or a handwritten message left in the mailbox outside his house â€” red brick with white columns â€” in Ho-Ho-Kus, N.J.

Builder James Bovino started his career as a school teacher and rose to become a builder with projects across the country. He now lives in this home in Ho-Ho-Kus, N.J.

Staff Photo / Michael Braga

Bovino's rise and fall provide a glimpse into how developers and bankers walked hand-in-hand during the real estate boom, and how they stopped playing by the rules even before the crisis hit.

In the end, developers like Bovino not only contributed to the failure of 69 banks in Florida and hundreds more across the country â€” their actions hurt ordinary workers and small businesses.

In Bovino's case, at least 120 building contractors and subcontractors say they were left with more than $13 million in unpaid bills, court records from six states show.

"Getting to the end in 2008, there is collusion between bankers and their customers," said Dick Newsom, who served as a regulator with the Federal Deposit Insurance Corp. for 17 years. "Borrowers knew banks were desperate to hide bad loans, and banks understood that developers would lie, cheat and steal â€” and do whatever they had to â€” to survive."

The Herald-Tribune began investigating Bovino and his businesses during its yearlong inquiry into failed Florida banks.

Regulatory documents, bankruptcy records, civil filings and interviews with 15 people show that lenders ignored warning signs and funneled money to his companies even after the recession took hold.

Among the findings:

• Bradenton's Freedom Bank did not look at Bovino's total debts before lending one of his companies $7.5 million in March 2007.

• Sarasota's Century Bank lent another Bovino company $900,000 in 2008 to cover unpaid interest and bounced checks.

• Cape Fear Bank in North Carolina broke laws and regulations when it provided a third Bovino company with $2.7 million in May 2008.

• Englewood's Peninsula Bank signed off on a $12.1 million loan to another Bovino company as the world economy was melting down in October 2008. The purpose of this loan, according to regulatory reports, was to help Peninsula get 200 acres of repossessed land off its books. Regulators called it an "improper sale," and analysts say the deal was meant to trick regulators into thinking the bank's capital stockpiles were deeper than they actually were.

But Bovino's story does not end with failed banks and unpaid loans. For the past two years, he has been scrambling to rebuild his real estate empire by repurchasing foreclosed properties at a discount.

In North Carolina, a company controlled by one of Bovino's associates bought 121 lots in a large housing project outside Wilmington. In Florida, a company managed by another associate bought two unfinished town homes and 11 vacant lots in Bradenton's Palma Sola neighborhood.

Shay Hawkinberry, a Sarasota real estate agent and interior decorator, said Bovino raised $1.1 million from a New York City investment firm to buy town homes in Florida and start fixing them up. But she said Bovino diverted some of the money to one of his projects in New Jersey.

Though Bovino's investors say he had permission to use the money as he saw fit, Hawkinberry said the diversion meant Bovino did not have enough left to pay nearly $40,000 to her and a flooring contractor.

"He told me to find a bank that would lend him money, because that would be the only way I would get paid," Hawkinberry said.

She introduced a Bovino associate to three local lenders, and each turned him down.

"I did everything I could," one of the mortgage brokers wrote in an email to Hawkinberry. "But when you have partial tax returns, bank statements missing pages, no idea what mortgages go to what property, it is really hard to get a loan approved."

From the bottom up

Before he became a multimillionaire, Bovino was a schoolteacher.

He began dabbling in real estate in the 1970s, buying and building homes and apartments in his spare time.

By the 1980s, he had become a full-time developer, accumulating at least 11 apartment buildings and three office structures in northern New Jersey by the decade's end.

James Bovnio built this office building in Woodcliff Lake, N.J., to serve as his company headquarters until late 2008.

Staff Photo / Michael Braga

Friends and business associates say Bovino fought to overcome polio as a child, which stunted his growth. But what he lacked in height, he made up for in tenacity.

Bovino also had a gift for relating to people at every level. That helped him on worksites, where he interacted easily with construction workers, and in planning board meetings, where he was able to charm public officials and concerned citizens.

It also helped when it came to raising money from bankers and winning favor from politicians. In 1991, New Jersey Gov. Jim Florio appointed him to the state's Bank Advisory Board.

But there was another side to Bovino.

Creditors say he was slow to pay his bills. In one well-publicized instance, he reneged on paying a multimillion-dollar commission to Dennis Sammarone, the former chef for hotel heiress Leona Helmsley.

Bovino was trying to buy a vacant 16-acre tract in New Jersey near the George Washington Bridge that was owned by the Helmsley family. But Helmsley, dubbed the "Queen of Mean" by the press, would not return his phone calls. So he asked Sammarone to intervene and the chef opened the door for Bovino to complete a $46.3 million purchase in 2003.

When Sammarone did not get the commission he was promised, he sued Bovino and eventually won a $13.9 million judgment.

Robert Cohen, who won a $2.3 million judgment after Bovino did not fully pay for the purchase of a New York stock trading firm, said Bovino had a motto: "Don't pay anyone until they ask you three times."

"He was supposed to give me $1.5 million upfront, but I don't believe he gave me half that amount, and I had to twist his arm for the rest," Cohen said. "After I won my suit, I talked to him about a settlement. He'd say a number. I'd say OK. Then I'd never see the money."

One of Bovino's former Florida executives, who asked to remain anonymous, was more succinct:

"If Jimmy owed you $1,000, he'd tell you he'd pay you. But that might be in 10 years from now â€” and that was OK with him."

Calling on Rigolosi

Newspaper reports and lawsuits show that Bovino also had a tough side that he displayed when competing developers threatened his turf, or when reluctant lawyers, planning commissioners, judges and politicians needed persuading.

Robert Fraser stood to make a large commission from the sale of land to a young developer who was trying to build a New Jersey apartment complex in 1989. But when Bovino blocked that purchase, Fraser sued.

He accused Bovino of hiring an attorney to tie up planning board meetings and slow the developer's efforts to secure approvals.

When that did not work, Fraser said Bovino offered the developer $200,000 to abandon the project.

Unsuccessful once again, Bovino turned to Vincent Rigolosi, a disbarred attorney with ties to the powerful Genovese crime family.

Rigolosi was indicted in 1981 and accused of helping Mafia crime boss "Cockeye Phil" Lombardo bribe a police officer who was Maced outside a Jersey Shore restaurant by Lombardo's son.

A jury later found Rigolosi not guilty, but the New Jersey Bar Association stripped him of his law license five years later. An opinion letter drafted by the the state Supreme Court said that Rigolosi "actively participated in a criminal conspiracy," and that his "conduct reveals a flaw running so deep that he can never again be permitted to practice law."

Despite Rigolosi's well-publicized history, Bovino repeatedly asked the ex-lawyer to help him work out intractable problems over the years. Rigolosi â€” a former mayor of Garfield, N.J., and Democratic Party chairman for Bergen County â€” had useful connections.

Indeed he was so powerful, Fraser said, that he persuaded Fraser's first attorney to quit.

"Rigolosi calls my attorney and tells him this is a B.S. lawsuit," Fraser said. "He said: 'These young kids don't know what they're doing' and my attorney got scared off. He tried to tell me to drop the case."

Fraser hired a new attorney, who was also approached by Rigolosi. But this time, the lawyer kept fighting for six and a half years.

The case was finally dismissed when the state Supreme Court ruled that Bovino, who owned a parcel adjacent to Fraser's, had reason to try to block the development.

A decade later, The Record of Hackensack reported that Rigolosi was still working for Bovino. A prominent fundraiser for Sen. Frank Lautenberg, Rigolosi convinced the senator to visit Bovino's $1 billion development near the George Washington Bridge in late 2007, the newspaper said.

But even Lautenberg, who is now deceased, could not help that failed project get off the ground.

Coast to coast

Bovino was luckier after the savings and loan crisis of the late 1980s and early 1990s.

He survived with his New Jersey real estate holdings largely intact, and by 1998 was ready to expand across the country.

His first stop was Wilmington, N.C., where he began developing housing projects in and around the coastal city. Then it was on to Arizona and Florida in the early 2000s and Georgia and New York by the middle of the decade.

At the peak, Bovino's companies were building homes in the suburbs of Phoenix and Atlanta, apartments in Raleigh, N.C., town homes in Palmetto and upscale condos in Port Chester, N.Y.

James Bovino built this suburban housing development near Atlanta.

Staff Photo / Michael Braga

Bovino also launched Citizens Community Bank in Ridgewood, N.J., in November 2004. One of his companies purchased an institutional trading firm the following year that bought and sold stocks and bonds on the New York Stock Exchange, and he laid out plans for building a 47-story skyscraper overlooking the Hudson River in Fort Lee, N.J.

"Jimmy's biggest downfall was that he had an opportunity to expand quickly â€” so he did," said Greg Cagle, a Georgia developer who helped Bovino buy a housing development in the Atlanta suburbs. "He expanded too quickly and ended up being spread too thin."

Smoke and mirrors

Bovino was always meticulously dressed.

A former employee said he would never wear a suit more than once before having it dry cleaned; his shoes were regularly sent off for polishing at Saks Fifth Avenue in New York.

He maintained swanky offices on Park Avenue, and even his flagship company's name â€” Whiteweld Barrister & Brown â€” was meant to project an air of Old-World affluence.

But the names were all made up.

A former employee said Bovino chose Whiteweld because his father worked as a janitor for White Weld & Co., a prestigious Boston-based global financial firm that can trace its history back to the 1630s. The other two names were tacked on because they sounded good together, the former employee said.

To further add to his cachet, Bovino started a charity called The Whiteweld Foundation to benefit children. It put on half-dozen concerts at Lincoln Center and Carnegie Hall during the real estate boom with headliners that included Gladys Knight, Chuck Mangione, Burt Bacharach and the Count Basie Orchestra.

James Bovino, center, established The Whiteweld Foundation and often threw charity galas at Carnegie Hall and Lincoln Center in Manhattan. Bovino is seen on the foundationâ€™s Web site with Polish President Lech Kaczynski.

whiteweldfoundation.org

"It was all smoke and mirrors, really," said Cohen, who sued Bovino after the New Jersey developer failed to pay him fully for his New York investment firm. "The guy was leveraged out the wazoo."

But bankers were impressed by Bovino, and he had few problems borrowing when the economy was strong.

In Georgia and North Carolina, Regions Bank became one his major backers. In Florida, Bank of America lent him more than $7 million to build town homes in Palmetto.

By 2006, however, big banks were reluctant to keep fueling Bovino's insatiable demand for money.

Community banks stepped into the void.

A former Century Bank executive, who asked not to be named because of a new job she has secured, said Century president John O'Neil was seduced by the fact that Bovino was the chairman of his own New Jersey bank and had served on a state bank advisory committee. O'Neil greenlit approvals for one of Bovino's companies to borrow $9 million in October 2006 to buy 274 acres in Manatee County.

"When the president says, 'We're going to do business with this guy,' you don't look for stuff that says we can't do this," the former Century executive said.

She said Century was trying to increase its loan portfolio and ensure bonuses for top executives at the time. "People do stupid things to meet their goals," she said.

O'Neil did not return a call and an email message to his Fort Lauderdale attorney.

Bankers at nearby Peninsula Bank and Freedom Bank were equally eager to meet Bovino's financial needs.

Peninsula lent one of his companies $2 million in May 2007 to develop town houses on the Hillsborough River, while Freedom failed to properly analyze Bovino's finances when it allowed one of his companies to borrow $7.5 million to pay off an existing loan.

A former Freedom loan officer, who also asked not to be mentioned by name because he is still employed in the banking industry, said executives did not try to count up Bovino's outstanding debts across the country before lending him money. They merely ordered an appraisal and evaluated the loan based on what they felt the collateral was worth.

Banking experts and former regulators say that was a big mistake.

The FDIC warned banks a year earlier to cut back on making speculative real estate loans to developers. Regulators also made it clear that bankers needed to complete a global financial analysis of a borrowers debts before extending money.

"With developers, you have to do a really good job of identifying contingent liabilities," said Newsom, the former FDIC regulator. "Nearly every greedy banker looks only at the project and ignores the other debts a developer might have."

'... regret what you said'

A few months after receiving loans from Freedom and Peninsula, Bovino's operations ran into trouble across the country.

Speculator-driven demand for housing in Arizona, Georgia and Florida started sliding in late 2006 and prices plummeted the following year.

One of Bovino's former managers in Georgia said Bovino's development began losing money in 2007 because of high construction costs in the mountainous terrain outside Atlanta.

In Manatee County, one of Bovino's companies was having so much trouble selling town homes at Oak Trail that he had to take out personal loans and buy six of the units himself to pay down some of what his company owed to Bank of America, court records show.

James Bovino sold four units in a Palmetto subdivision to his employees and another six units to himself after he couldnâ€™t find other buyers.

Staff Photo / Michael Braga

In New Jersey, he was facing the lawsuit from Leona Helmsley's former chef and the Environmental Protection Agency fined one of his companies $600,000 for failing to get permits before installing a sewer system at one of his developments, court records show.

About the same time, The Record ran a front-page story in December 2007, about how Bovino's $1 billion development by the George Washington Bridge was dead in the water.

That was the time for banks all across the country to stop funding Bovino, financial experts say. But only a few adopted that approach.

A Regions Bank loan officer cut off Bovino's funding in both Georgia and North Carolina in early 2008 after he refused to use collateral from one of his North Carolina projects to shore up more than $6 million in Georgia loans.

"He stopped funding our North Carolina project ... because we wouldn't agree with his cross collateralizing," Bovino said in a deposition after Regions filed to foreclose. "I told him: 'You'll never see that. And he said: 'You'll regret what you said.'"

Under a cease-and-desist order from state and federal regulators, Freedom Bank also acted swiftly to foreclose on Bovino in May 2008.

But Cape Fear Bank provided one of Bovino's companies with $2.7 million that same month to help it pay back taxes and cover future interest payments.

That loan later went into default and was mentioned as one that helped bring down the North Carolina bank when the FDIC sued Cape Fear's officers and directors in April 2012.

"No credit history was located in the file," the FDIC wrote in its suit. "Additional deficiencies and violations identified on this loan include the failure to adhere to applicable laws and regulations."

Century Bank executives were equally negligent, according to a similar lawsuit filed by the FDIC.

Regulatory reports show that one of Bovino's companies owed the bank $280,000 in back interest payments in late 2007. But Century kept handing him more money.

The bank first lent the company enough to cover unpaid interest in March 2008. Then in September, it lent Bovino's company another $641,000 after the company sent the bank a string of bounced and uncashed checks.

"That's called 'pretend and extend,' " said Irv DeGraw, a banking and finance professor at St. Petersburg College. "The bank was playing a little game of make-believe in the hope that the market would turn and everything would be OK."

Peninsula Bank took that game to a higher level.

One of Bovino's companies defaulted on a $2 million loan from the bank in early 2008. But instead of foreclosing, Peninsula worked out a deal in which it would renew the loan as long as one of Bovino's companies took 200 acres in St. Lucie County off the bank's hands.

Peninsula had foreclosed on the former owner and did not want to take a loss. So it transferred the land to Bovino's company and lent him $12.1 million in October 2008 â€” just as the economy was reeling from the collapse of AIG and Lehman Brothers.

"That's outrageous," said Newsom, the former FDIC regulator. "He's purchasing a property to mask a loss to the bank."

Accelerate

Bankruptcy and civil court records show that at least 120 subcontractors have demanded that Bovino's companies repay debts totaling more than $13 million.

These include drywall contractors, plumbers, cabinet makers, pool maintenance companies, roofers, engineers, architects, tile companies, masons and electricians in six states. The majority have won judgments in their favor.

One of them, a general contractor who paved roads and installed a sewer system at Bovino's 400-lot development outside Wilmington, N.C., is out just over $1 million, according to a judgment filed in New Hanover County.

James Bovino bet and lost on a 400-lot development in Brunswick County, N.C. It remains vacant.

Staff Photo / Michael Braga

"Instead of telling us to stop when he knew he was in trouble, he told us to accelerate," said Robert Thomson, a Wilmington general contractor. "So we started putting in the really big-money stuff like sewers and sidewalks."

That was classic Bovino, according to two of his former managers.

As he began running out of money, those managers say Bovino pressed subcontractors to hurry up and finish their work so he could submit their invoices to the bank for payment. But the managers said Bovino did not always use the bank funds to pay his subcontractors as required by law.

Ronnie Lewallen, a former executive at Bovino's housing development in the Atlanta suburbs, says his predecessor "did everything in his power to get subs paid before Jimmy ran out of money."

This angered Bovino and his New Jersey executive team, and they quickly clamped down on the payments.

"When he left," Lewallen said, "they put me in charge. But they didn't let me control the money. I'm owed more than $100,000."

Though it was not uncommon for subcontractors to go unpaid during the Great Recession, developers understand that their long-term reputations are tied to their ability to pay their bills.

Bovino does not seem to have learned that lesson.

An associate of builder James Bovino bought these Bradenton town homes in March, but was hit with liens after failing to pay subcontractors.

Staff Photo / Michael Braga

In March, he raised $1.1 million from John Bivona, a New York attorney and owner of Felix Investments. Manatee deeds show he used $950,000 to purchase a pair of town homes and 11 vacant lots in Bradenton's Palma Sola area.

That left $150,000 to fix up the town homes and get them ready for sale, says Hawkinberry, the interior decorator who helped Bovino find the property.

But Hawkinberry said Bovino diverted some of the money to a house he was building in New Jersey, so there was not enough left to pay the bills.

In an email to Hawkinberry, Bovino explained that he intended to repay the money as soon as he sold the house in New Jersey. But a "greedy lawyer" took it to pay one of Bovino's outstanding debts.

"That's what happens when they find out our past history," Bovino wrote.

Bivona, who provided the $1.1 million, told the Herald-Tribune he was not concerned about the diversion of funds.

"He didn't do anything he shouldn't have done," Bivona said. "If he needed to use the funds for something else, that was fine with us."

Bivona â€” a licensed attorney â€” also disputed owing anything to Hawkinberry.

"That's a B.S. lien," he said. "That money is not owed her."

But Hawkinberry has kept all of Bovino's emails and telephone messages, and they tell a different story.

In them, Bovino acknowledges he owes her money but says the only way she is going to get paid is if she helps him get a $500,000 loan using the two town homes as collateral.

Hawkinberry consequently referred Bivona and his wife to 1st Manatee Bank, Movement Mortgage and C1 Bank. But they all declined to make the loans.

Throughout the process, Bovino told Hawkinberry he intended to use some of the funds from the loans to pay off debts owed to Iberia Bank, which acquired Century Bank's assets after that Sarasota lender went under in November 2009.

"That's what I'm concerned about now," he said in a voicemail message.

He also told Hawkinberry not to say anything to Bivona.

But when it became clear that Bovino was planning to take proceeds from the loan to pay off past debts, Hawkinberry called Bivona.

That made Bovino angry.

"If you insist on avoiding my directions, I will make sure your association with the company is terminated!!!" Bovino wrote in an email message. "And let me say this, if Mrs. Bivona's loan is denied and I find out that you had a conversation with the bank that caused it to be denied you will be hearing from our attorney very quickly."

Hawkinberry told Bivona that if Bovino remained involved in the property, it would be difficult to sell the units. She told him she had a buyer willing to purchase the property for more than Bivona's company paid.

But Bivona told the Herald-Tribune he was not interested in that offer.

"We're not going to be frightened into doing that," he said.