A $220 million-asset Chicago bank and its former attorneys have shelled out $9.5 million plus interest to settle a shareholder class action.
A Chicago judge last week approved the settlement made late last year in which South Chicago Bank agreed to pay $6.25 million to shareholders who alleged that the bank had withheld information about its stock value during a 1987 merger into a new holding company.
The bank's former law firm - since disbanded - is paying the remaining $3.25 million.
Neither admitted liability under the settlement.
"I think it was a very fair settlement to the shareholders and to the bank, and it's going to make a lot of shareholders jubilant," said Richard G. Schultz, an attorney at Foran & Schultz, Chicago, who represented the shareholders.
Less jubilant is the bank, whose payment contributed to a nearly $4.4 million net loss for 1995, according to James A. Fitch Jr., president and chief executive.
South Chicago's annual net income usually averages about $2.5 million, he said.
The 1995 loss also includes actions the bank took once it was apparent it was going to have a loss year, Mr. Fitch said. "We're pleased to settle this, to get the litigation behind us and get back to the business of taking care of customers," he said.
The case stems from 1987, when the institution, then South Chicago Savings Bank, merged into a newly formed holding company, Advance Bancorp.
As Illinois law allows, several shareholders declined the new stock, disagreed with the company's valuation of their shares, and went to court to seek a fair value, said Mr. Schultz, who also represented those shareholders.
The Illinois Supreme Court upheld a $4 million judgment for the shareholders in 1991.
However, during the trial, other shareholders became convinced that the bank had had information on the stock's value that it did not disclose in its 1987 proxy, Mr. Schultz said.
So more shareholders sued in 1991, saying that if they had known this "material information" they, too, would have declined the stock exchange in the merger.
Class-action status was certified in 1993, covering more than 200 shareholders who held about 41% of South Chicago Bank.
Also in 1993, South Chicago Bank sued its attorneys in the 1987 transaction. The bank said that, if it was found liable, its attorneys should be held liable for the same damages, according to the settlement agreement.
The firm - Pope, Ballard, Shepard & Fowle - has since disbanded. But its insurance covered its part of the settlement.
Of the total settlement, Mr. Schultz and co-counsel William Goldberg of Holleb & Coff, Chicago, get more than $3.3 million.
About $6.2 million will be distributed to shareholders, or about $1,500 per share.