Developer's lawsuit against bank grows more acerbic

A summer of love it has not been in the case of J. Brian O'Neill v. Citizens Bank of Pennsylvania.

The litigation, initiated in January with harsh accusations and wildly high claims for damages, has grown even more acerbic since a judge urged both sides to settle in June.

Last month, lawyers representing the bank accused developer O'Neill of harassment for trying to depose five directors or high-ranking executives of Citizens and its parent, Citizens Financial Group Inc., who, they said, had no direct knowledge of O'Neill's dealings with the bank.

Now comes an allegation by O'Neill that the banking company altered or destroyed evidence in the case.

"Obstruction of justice" is what O'Neill's attorneys called it in a motion filed earlier this month in Philadelphia Common Pleas Court.

"More bluster piled upon bluster" is what the bank's attorneys called it in a response filed Friday.

So on Wednesday, the parties will head again to the courtroom of Common Pleas Senior Judge Albert W. Sheppard Jr.

In a brief interview Friday, Sheppard said he was disappointed by that, calling the legal expenditures involved to sustain the continuing volley of charges "bad money after good."

"They have to do what they have to do," Sheppard said with a sigh.

He emphasized that though allegations of obstruction of justice were typically criminal in nature, in this instance "it's not a criminal matter."

Neither side would comment for this article.

Meanwhile, O'Neill's $700 million Uptown Worthington retail-office-residential development in Malvern remains largely unfinished - and the payroll for O'Neill Properties Group L.P. is down to 75, from 150 when the recession hit in late 2007.

His battle with Citizens is a high-profile split, ending what had been a symbiotic relationship of eight years and more than $180 million in bank financing for O'Neill projects. Then the economic crisis hit, and banks lost their lending nerve. O'Neill has alleged that Citizens, Citizens Financial Group, and their parent, Royal Bank of Scotland Group P.L.C., breached significant financial commitments to him, destroying or seriously harming some projects.

Those include: Uptown Worthington, a much-anticipated redevelopment project on 106 acres along Routes 202 and 29 once occupied by the Worthington Steel plant; Horizon Corporate Center, a 101-acre office-retail-restaurant complex in Bensalem; and The Point at Sayreville, a 400-acre retail-residential development on a former paint-manufacturing plant site in North Jersey, near Perth Amboy.

The lawsuit O'Neill initially filed was shocking for the size of its damages claim: $8 billion, amended in April to $297 million.

Citizens contends the suit is retaliation for its securing $64 million in judgments against O'Neill relating to Worthington and Horizon. Sheppard has not yet ruled on a bank motion to dismiss the case.

Now, he has more work.

O'Neill's obstruction-of-justice allegation and request for sanctions against the bank stem from an update a bank employee made to an Internet-based loan-tracking system called Salesforce.com.

The entry at issue involves part of a $40 million loan O'Neill contends the bank agreed to extend to him for the first phase of the Sayreville project - and then canceled just before the scheduled closing.

The bank has said that while the loan was initially approved by Citizens, Royal Bank of Scotland ultimately nixed it for a variety of reasons.

Triggering an allegation of document-tampering was an entry that bank employee Jeffrey Nugent made to Salesforce.com three days after he gave a May deposition in connection with O'Neill's lawsuit.

On the day of that deposition, according to court documents, the bank's description of its financing commitment to O'Neill's Sayreville project, dated Sept. 19, 2008, read: "Opportunity Closed/Won. Probability 100%." An entry dated May 7 changed the status of the funding agreement to: "Opportunity Lost. Probability 0%."

The Aug. 13 motion for sanctions, filed by a team of O'Neill attorneys from Kaufman, Coren & Ress P.C. and Lamb McErlane P.C., states that at the same time the bank contends it had made no funding commitment to Sayreville, "the bank is altering and destroying critical documentation supportive of plaintiffs' claims" that it had.

"Inflamed rhetoric" about an "innocuous" update is how Robert C. Heim, a Dechert L.L.P. attorney for Citizens, characterized O'Neill's allegations of misconduct and calls for sanctions against the bank.

O'Neill contends he suffered millions of dollars in damages as a result of having to obtain $40 million in replacement capital for Sayreville on short notice.

Sheppard has already resolved the dispute over the depositions of the bank directors and executives O'Neill sought. On Aug. 16, he sided with Citizens and blocked the depositions of Ellen Alemany, chief executive officer of Citizens Financial Group, and directors Judith M. von Seldeneck and William P. Hankowsky. He has allowed the depositions of Daniel Fitzpatrick, president and CEO of Citizens Bank for eastern Pennsylvania and New Jersey, and Paul Howard, executive vice president and chief credit officer for Citizens Financial Group.

In an interview about the case last week, Robert Miller, who teaches corporate law at Villanova University School of Law, said that "lots of deals blew up in the financial crisis" and that many were ultimately renegotiated.

Whether that can be the ultimate outcome in O'Neill v. Citizens is hard to assess given its "nasty" tone, he said.

"At the end of the day, they both want this to go away at a reasonable cost," Miller said. "But hotter heads might prevail."

Read more about developer J. Brian O'Neill's case against Citizens Bank of Pennsylvania, and more about commercial development in the region, at http://go.philly.com/commercial

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