A settlement between Capital One (COF) and John Kanas will slightly delay BankUnited's expansion plans in the Northeast.
BankUnited (BKU) had planned to open several branches in New York starting this fall after acquiring Herald National Bank earlier this year. But the legal settlement, announced Tuesday, bars BankUnited from adding branches in New York, New Jersey and Connecticut until the end of January.
Kanas, a former Capital One executive and the chief executive at BankUnited, said the delay was preferable to a lengthy legal battle. "There was a substantial risk to BankUnited had the noncompete lawsuit gotten stretched out" by going to trial, Kanas said in an interview.
"Our branches wouldn't be ready until late fall anyway so I don't view this as a long extension," Kanas said. "I believe settling was in the best interest of BankUnited to get this behind us."
Kanas and John Bohlsen, BankUnited's chief lending officer, agreed to personally pay $20 million to settle claims that they breached a 2007 employment agreement with Capital One. The executives joined Capital One in 2006 after the McLean, Va., company bought North Fork Bancorp in Melville, N.Y.
Kanas, who led banking operations, left Capital One less than two years later and eventually joined a group of private equity firms that bought BankUnited after the thrift's failure in 2009. Bohlsen led Capital One's commercial banking operations before leaving.
Under the settlement, Herald National will remain a separate unit from BankUnited; Kanas and Bohlsen will avoid involvement with Herald until next January. The settlement also includes "certain nonsolicit arrangements with respect to Capital One customers, as well as certain non-hire arrangements with respect to Capital One employees," according to a press release from Capital One.
The original noncompete expires on Aug. 6. Kanas said that, after that day, BankUnited will be able to announce any acquisition of a bank, customer or personnel in the restricted markets so long as it does not come from Capital One. Then on Feb. 1, 2013, it's fair game.
"We're going to work very hard" after the settle period ends, Kanas said. "We continue to look for M&A opportunities in the southeast and we continue to think about what opportunities might arise in the Northeast once we get there."
Kanas said that the provisions in the settlement agreement will not have any material financial impact on the Miami Lakes, Fla., company. As part of the settlement, Kanas and Bohlsen denied any liability and made no admission of wrongdoing.
Capital One said in its release that it, too, was pleased with the settlement, which "affirmed the validity of the noncompetition agreements that were negotiated in good faith."