CertusBank fired its founders for providing inaccurate budgets and for failing to devise a strategy after its failed-bank deals dried up, the Greenville, S.C., company said in court filings.

The $1.7 billion-asset company said in a response to a lawsuit filed by Milton Jones, Walter Davis and Angela Webb that the decision to fire the executives was not racially motivated. Certus also denied in documents filed Friday in the District Court for South Carolina that it participated in a conspiracy to destroy the executives' reputations.

The ousted execs filed a lawsuit last month against the bank and Benjamin Weinger, a hedge fund investor, for defamation and conspiracy, claiming that a campaign of "lies and half-truths" had caused their firing and destroyed "their business and personal reputations."

CertusBank claimed in its response that the executives were dismissed because they failed to adhere to budgeted expense reductions as the company lost millions. The response also alleged that the executives tried to conceal from the board the depth of Certus' financial troubles and of investor dissatisfaction.

The company's finance department prepared a budget in early 2013 forecasting tens of millions in losses for the year, Certus said in its legal response. "Displeased with this projection," management reworked the budget to show a loss of just $3.5 million and then presented that forecast to the board, the documents added. Certus would go on to suffer a pretax loss of $84 million on the year; it lost a another $9 million in the first quarter of 2014, according to a call report filed with the Federal Deposit Insurance Corp.

The founders also failed to convey investor criticism of them to outside directors, Certus claimed in its filing.

The Certus executives in December 2013 "began to receive letters from shareholders expressing great concern with the losses at the Bank and seeking information regarding the Bank's strategic plan moving forward," company claimed in its response. "These letters were not provided on a timely basis to the outside directors, and a number of the letters were later found unopened in the desk of a member of the [executive team] though these letters were individually addressed to the outside directors."

CertusBank has requested that the dispute with the ousted executive be handled through arbitration. Three of the company's four founders were terminated by the board on April 9, less than two weeks after American Banker reported on a conflict with investors over spending and related-party transactions tied to Certus' executives. A fourth founder, Charles Williams, resigned on March 31, and is not part of the lawsuit.

Weinger has not yet filed a response to the ousted executives' lawsuit.

The American Banker article detailed a controversy over the company's high expenses, including executive apartments, charter plane use and tickets to sporting events, and its payments to a consulting firm founded and owned by the top executives. The South Carolina Attorney General's office recently began investigating allegations of mismanagement.

The ousted executives claimed in their lawsuit that the expenses were appropriate and were approved — and even encouraged — by the board. They also claimed that payments to the consultancy, Integrated Capital Strategies, were approved by the board, investors, and the Office of the Comptroller of the Currency, and that none of the founders made a profit from their ownership of the consultancy.

CertusBank was founded in early 2011 with the backing of powerful New York hedge funds to buy failed banks in the Southeast. The company received a shelf charter after a group of prominent Democrats in the House of Representatives lobbied regulators on its behalf.

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