Hope for Chuckanut Ridge

If you are interested in saving Chuckanut Ridge, there is some glimmer of hope for preserving this ecologically-rich and environmentally-sensitive property. If you are willing to make a single phone call and/or send a single email to prevent Horizon Bank’s Fairhaven Highlands project from destroying this mature urban forest, which serves as the headwaters to two salmon-bearing streams, a wildlife sanctuary, and an extensive network of high-value wetlands… please read on.

Violations of the 1994 FDIC Order

Banking and real estate development are like oil and water; they don’t mix. Banking relies on a relationship business model designed to keep customers happy and loyal. By contrast, real estate development is a transactional business designed to make one-time profits for developers before they move on to another project. Real estate developers are comfortable creating enemies of local residents. Bankers are not.

For that reason, real estate development has long been considered as an “activity that is not permissible” for FDIC-insured banks. Banks can apply for an exception, and, in 1994, the FDIC approved Horizon Bank’s application to engage in real estate development activities subject to four conditions. The two most critical conditions are impacted by the bank’s Fairhaven Highlands development application.

Condition 2: “That activities be limited to the development of real estate intended for single-family residential use;” and

Condition 3: “That the applicant’s aggregate investment in the activity at any one time not exceed 25% of its Tier 1 capital.”

It is clear that Fairhaven Highlands, a multi-family development, violates Condition 2. The original application proposes the construction of 558 multi-family units, or 76% of the 739-unit total. The other alternatives being considered propose the construction of either 688 multi-family units (93%) or 722 multi-family units (98%). Horizon Bank’s declared preference is to build 722 multi-family units. It would be hard to convince anyone - especially the FDIC - that the Fairhaven Highlands project is intended for “single-family residential use.”

Conclusion: Fairhaven Highlands violates Condition 2.

Condition 3 is a moving target because the bank’s investment in the project and its Tier 1 capital are constantly changing. According to Horizon Bank’s June 30, 2009 quarterly report, its “real estate joint venture has a consolidated carrying amount of $27.2 million.” In other words, its investment in real estate development activities has mushroomed to $27.2 million as of June 30. According to the Horizon’s Uniform Bank Performance Report, its Tier 1 capital as of June 30 is $45.3 million. Therefore, the bank’s real estate investment now represents 60% of its Tier 1 capital (27.2 / 45.3), a far cry from the 25% limit imposed by the 1994 FDIC Order.

Conclusion: Fairhaven Highlands violates Condition 3.

So, Horizon Bank has violated two key conditions of the FDIC Order.

Does anyone really care?

Well, apparently the FDIC does, and this is where you come in.

We have been told that FDIC attorney Jim Miller and the FDIC Case Manager Richard Evans “are in constant communication regarding Horizon Bank.” According to Mr. Miller, “the issues involved in this matter have been the subject of many discussions within the FDIC,” and the FDIC will “ensure that the units that may be ultimately approved by the city of Bellingham for construction on the site are, in fact, intended for single-family residential use and that the Bank remains in compliance with condition #2.” Additionally, the FDIC “will continue to closely monitor the Bank’s investment in this regard to ensure that the Bank remains in compliance with condition #3.”

In a recent email from Mr. Miller, he closed by stating, “We appreciate receiving your information.”

How you can make a difference

Every person who either opposes Fairhaven Highlands and/or supports the preservation of Chuckanut Ridge has their own personal reasons for doing so. These personal views need to be respected.

If you either oppose Fairhaven Highlands or support the preservation of Chuckanut Ridge – for whatever personal reasons you have – you can make a difference by focusing on this single issue.

Horizon Bank has violated two important conditions of the 1994 FDIC Order that allowed the bank – as an exception to standard banking law - to engage in the real estate development business. The FDIC has the authority – indeed, the responsibility - to order Horizon Bank to cease and desist from pursuing the Fairhaven Highlands development, a project that violates the 1994 FDIC Order.

It’s really that simple.

If you want to make a difference, I urge you to contact FDIC Attorney Jim Miller and encourage the FDIC to properly enforce the conditions of the 1994 FDIC Order. Let Mr. Miller know why you oppose this project and/or support the preservation of Chuckanut Ridge. Mr. Miller is very cordial and has expressed an interest in hearing from us.

Jim Miller’s direct line is: (415) 808-8175.

If you prefer to send an email (or would like to follow up by email):

Jim Miller’s email address is: JMiller@FDIC.gov

Richard Evans’ email address is: REvans@FDIC.gov


For those who have wondered how you can make a difference, I hope you will.

Time is of the essence. Please call Mr. Miller today!

About Larry Horowitz

Past Writers • Member since Jan 16, 2008

Comments by Readers

Larry Horowitz

Oct 03, 2009

First, I would like to thank all of you who have already called and/or emailed FDIC attorney Jim Miller and FDIC Case Manager Richard Evans.  I especially thank those of you who have sent copies of your emails to me and have emailed me to let me know you have called.  Please continue to do so.

A number of people have asked for suggestions about what to say when they call Mr. Miller.  I believe the following list of questions might be helpful:

1) Is the 1994 FDIC Order - which restricts Horizon Bank to single-family residential development comprising no more than 25% of its Tier 1 capital ? STILL IN EFFECT?  Has the Order been modified in any way?

2) Is there any question that Horizon Bank?s Fairhaven Highlands project is a predominantly multi-family development in clear violation of Condition 2 of the FDIC Order, which restricts the bank to single-family projects?

3) Is it true that Horizon Bank has invested $27.2 million in its real estate development activities? 

(To confirm, click on the ?Related Link? above for Horizon Bank?s June 30, 2009 Quarterly Report.  In the ?Find? box of the PDF, type in ?27.2? and click enter to search.  You?ll be taken to the last paragraph on page 29 of the PDF (page 24 of the actual report) where you?ll find this sentence, ?As of June 30, 2009, the real estate joint venture had a consolidated carrying amount of $27.2 million…?)

4) Is it true that Horizon Bank?s Tier 1 capital is $45.3 million as of June 30, 2009?

(To confirm, click on the ?Related Link? above for Horizon Bank?s Uniform Bank Performance Report.  You?ll see that the bank?s ?Net Tier One? as of 6/30/09 is $45,301,000.  This is the fifth number in the first column of numbers.)

5)  Does Horizon Bank?s investment in its real estate development activities represent 60% of its Tier 1 capital as of June 30? 

(This is simply the ratio of $27.2 million to $45.3 million, or 60%.)

6) Is there any question that Horizon Bank has violated Condition 3 of the FDIC Order, which limits the bank?s investment to 25% of its Tier 1 capital?

7) Did Horizon Bank intentionally ignore the conditions of the FDIC Order or were they simply negligent in their compliance?  Are they out of compliance with any other FDIC conditions or requirements?

8) When did the FDIC first discover these violations?

9) What has been Horizon Bank?s response?

10) Does the City of Bellingham know that the FDIC plans to enforce its 1994 Order and will ?ensure that the units that may be ultimately approved by the city of Bellingham for construction on this site are, in fact, intended for single-family residential use.?

11) Why has Horizon Bank spent more than $200,000 on an EIS for a multi-family project if they can only pursue a permit for single-family development?  Isn?t that a substantial waste of time and money, not only for Horizon Bank, but for city staff and the 17 federal, state, local and tribal agencies currently reviewing this 500-page document?

12) When does the FDIC plan to enforce the conditions of its 1994 Order?

13) What can the public do to ensure Horizon Bank?s compliance?


Tip Johnson

Oct 03, 2009

After a quick review of the new plans, I remain unconvinced that they could even build this project without breaking their already teetering bank.  I think it is a ruse.

I am commenting to the FDIC that the project is more likely an attempt at blackmail and fraud against the Greenways Levy, that the plans are nothing more than scary pictures of a horrific environmental catastrophe, and a tragedy to neighborhood character, designed to squeeze top dollar out of the public coffers. That’s a bad plan for a so-called community bank.

I am suggesting a subpoena to the state of Delaware to finally reveal the original consolidators of the property, principals of the West-Eden Land Development corporation officed in Lynden, who originally benefited from the illegal rezone that added so much phantom value to the property and created the mess we witness today.

This key piece of information would establish the chain of ownership and become critical to understanding the conundrum of this projects ability to survive, answering the question of why the city did none of the things they should have done that would have limited the project’s damage, and did many things they shouldn’t have that preserved the project.

To me, it looks like a bunch of family and friends trying to make the most out of a piece of essentially undevelopable property.  It was not developed for over a century because of environmental constraints, long before the importance of wetlands and salmon streams was recognized.

Today, the prospect is literally absurd. Something fishy is going on - and not in the 90 million gallons of pure, clean water that the property delivers to tributaries of Padden and Chuckanut creeks every year.

I know the FDIC will not share my personal conclusion, but here it is: Up with the Woods, Down with the Bank!


Larry Horowitz

Oct 04, 2009

The following letter was sent to FDIC attorney Miller and FDIC Case Manager Evans by Bellingham resident and former Deputy Attorney General for the California Dept of Justice, Michael Botwin:

Dear Mr. Miller and Mr. Evans,

I am a Bellingham resident and I am sending this e-mail to urge the FDIC to take action against Horizon Bank for its violation of the 1994 FDIC order.  That order permits Horizon Bank, through its wholly owned subsidiary (Westward Financial Services Corp.), to engage in certain types of real estate development activities provided those activities are limited to “the development of real estate intended for single-family residential use” and its “aggregate investment in the activity at any one time [does] not exceed 25% of its Tier 1 capital.”  (See FDIC Order, ?? 2 and 3.)  I believe Horizon Bank has arrogantly and defiantly violated both those provisions in regard to its development of Fairhaven Highlands. 

As you know, Fairhaven Highlands (also known as Chuckanut Ridge) was purchased in 2005 by Westward Financial Services Corp. as part of a joint venture with Greenbriar Northwest LLC (hereinafter “Greenbriar”).  Horizon Bank never intended to comply with the FDIC order in regard to Fairhaven Highlands by limiting it to single-family dwellings.  On April 18, 2005, Greenbriar filed Subdivision Variance Application and a SEPA Environmental Checklist with the Bellingham Planning and Community Development Department (hereinafter “Planning Department”).  The Variance Application described the project as “Residential - Multiple Planned.”  (See Variance Application, ? 8.)  The SEPA application contained more detail and described the project as follows:


Copies of these two documents can be viewed on the City of Bellingham’s official web page at www.cob.org/government/departments/pcd/fairhaven-highlands/index.aspx under the topic “Applications.”  It seems to me that Horizon Bank intended to violate FDIC’s order from the initiation of the Fairhaven Highlands project and never intended to limit it to “single-family residential use” as required by the order.

The Fairhaven Highlands project caused public outrage from the start.  Horizon Bank’s and Greenbriar’s in-your-face attitude exacerbated the public’s resentment over the project.  At a meeting with approximately 500 local residents, David Edelstein stated, “We bought density” when explaining how Horizon Bank and Greenbriar intended to replace the forested mountain that frames the southern border of Bellingham with 10-story high-rises and with other multi-story buildings. 

Signs containing statements such as “Stop Horizon Bank from Destroying Chuckanut Ridge” started appearing throughout the South side of town.  Residents organized.  Responsible Development, a non-profit corporation, was created to fight the development.  (See www.rdnow.org.)  RD hired a prominent Seattle land-use attorney to fight the project and has already spent over $40,000 in fighting Horizon Bank’s project.  More recently, another group (Friends of Chuckanut) also joined the fight against Fairhaven Highlands.

The Fairhaven Highlands development is described as one of the “Top Issues” on the City of Bellingham’s website.  The city acknowledges that the Fairhaven Highlands “proposal has provoked significant community debate. Many area residents are opposed to developing Chuckanut Ridge, which is one of the last large, wooded properties remaining within City limits. They say they prefer to see it preserved for open space or recreational use, they are concerned about protecting sensitive environmental features, and they are concerned about traffic and other neighborhood impacts.”  (See www.cob.org/issues/fairhaven-highlands.aspx.) 

On September 29, 2009, the Draft Environmental Impact Study of this parcel was finally released by the City.  (Note that Greenbriar is responsible for paying for this report, which exceeds 560 pages.) A local newspaper, The Bellingham Herald headlined this issue, reporting that the Fairhaven Highlands project “is the most controversial one inside city limits in recent memory.” (To read the full DEIS online, see www.cob.org and click on “Fairhaven Highlands? under “Top Issues”)

Patrice Clark, a member of a prominent Bellingham family that donated a sizable parcel of waterfront land to a land trust for the public benefit, terminated her sizable business dealings with Horizon Bank in protest to the Fairhaven Highlands project.  In her October 24, 2007 letter to Horizon Bank, she states the following:
“I shared my concerns about Horizon Bank?s involvement with the Chuckanut Ridge development. I was hoping to hear that your bank would decide that developing this land was not in the bank’s best interest and that you would want to be seen in this community as a “good neighbor‟ and sell to the city of Bellingham, reinvesting in other properties that would not encourage sprawl as this development would do. Unfortunately, you did not see it that way .  .  .  [?]  There still is time to rethink your bank’s investment.  I hope you and your board members will seriously reconsider your option to partner with the city of Bellingham to find a way to finance transfer of this ‘gem’ to public ownership and preservation.”  (See www.rdnow.org/Documents/Patrice%20Clark%20Horizon%20Bank%20letter.pdf.) 

Other customers also cancelled their accounts with Horizon Bank for similar reasons.

Each year, local residents picket Horizon Bank’s Shareholders’ Meeting in protest.  Some residents even purchased 1 share of Horizon Bank stock so they could attend the annual shareholders’ meeting.  It was reported that during its July 21, 2009 meeting, Lawrence Evans and Richard Jacobson (Chairman and President, respectively) claimed Horizon Bank was in compliance with the 1994 FDIC order and furthermore, the FDIC did not care about compliance with its order.

Equally disturbing is the bank’s failure to limit its investment in real estate developments to no more than 25% of its Tier 1 capital and then misrepresenting its financial status to shareholders.  Horizon Bank’s investment in its real estate developments is substantially more than twice limit imposed by the FDIC.  Worse yet, the bank’s President purportedly misrepresented the bank’s financial status to shareholders at the last shareholders’ meeting.  He allegedly stated that the bank had only invested $18 million in the Fairhaven HIghlands project instead of the $27.2 million it had actually invested and that the Bank had $90 million in Tier 1 capital instead of the $45.3 million it actually had.  In fact, the Bank had lost 50% of its Tier 1 equity in 3 months!  It is my understanding that the purpose of a community bank is to serve the needs of the community and not to deceive it or destroy one of its ecological gems.

Many Bellingham residents have expended substantial time and money to fight Horizon Bank’s Fairhaven Highlands project in order to preserve a unique parcel of land that is a big part of Bellingham’s character.  Among them, Dr. John McLaughlin, a professor of Environmental Science at Western Washington University, explained in numerous letters how the proposed Fairhaven Highlands project would be devastating to the local environment and how preservation of that property offers a unique educational opportunity to grade schools and to the university.  It is the only parcel of land in the country within walking distance of schools and the university wherein field environmental training can be provided.  (See www.rdnow.org/reports.htm)

I have been a Deputy Attorney General for the California Department of Justice for around 34 years until my retirement in 2003, at which time I moved to Bellingham.  I enforced California’s consumer protection and white collar crime statutes during most of my tenure.  I prosecuted numerous cases at the request of various state, local, and, on occasion, federal agencies.  I strongly believe it is important for agencies to enforce their orders.  The failure to do so results in the lack of public confidence in the agency and a lack of respect of those who are regulated.  It promotes lawlessness rather than compliance and deterrence. 

The Draft Environmental Impact Study has been completed and the period for public comment is ticking.  Now is the time for the FDIC to act and enforce its order.  Its failure to do so will cause numerous members of the public and public agencies to spend countless hours evaluating the 500+ page report and commenting upon it.  All this time, effort, and expense will be wasted if the FDIC ultimately intends to prohibit the proposed multi-unit project.


Michael Botwin