Trans Financial Inc. of Bowling Green, Ky., called the lawsuit filed against it this week by its former chief executive "without merit" and vowed an aggressive defense.

Douglas M. Lester, who was fired in June after 12 years at the helm of Trans Financial, said the reason was that his management decisions jeopardized the business interests of four bank directors.

Trans Financial officials said they didn't know until the special board meeting June 4 at which Mr. Lester was fired that he was concerned about the bank's dealings with any of the directors. He was fired mostly because of the bank's poor performance, they said.

"Until that letter showed up, I never heard about any objections," said Michael J. Moser, an executive vice president, referring to a document circulated by Mr. Lester at the June 4 meeting.

Thomas R. Wallingford, acting chairman, said in a press release that the company later investigated the allegations and found "no evidence of improprieties."

Mr. Lester's lawsuit includes accusations that four directors breached their fiduciary duty to shareholders in order to protect their business interests with Trans Financial.

Director Frank Mastrapasqua, for example, received more than $1 million a year from the bank in investment consulting fees and rental income, but failed to live up to the obligations entailed, according to the suit.

Trans Financial's 1996 proxy put the 1995 consulting fees at $324,028 in addition to smaller amounts in rental income.

Industry lawyers said lawsuits involving business transactions between directors and their banks are rare because such business is conducted under intensive oversight, from bank boards as well as regulators and auditors.

"It's the best business that a bank can do, because it's so clean," said Walt Moeling, a lawyer with Powell, Goldstein, Frazer & Murphy in Atlanta.

Mr. Lester said in his lawsuit that after his dismissal he was given one hour to accept $600,000 as severance pay or the bank would say he had been terminated with cause. He made a counteroffer, which was rejected by the bank, said his lawyer, Donald L. Cox.

Severance negotiations have been discontinued, Mr. Cox added.

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