CertusBank's ousted management team has filed a lawsuit against the Greenville, S.C., bank and one of its investors for allegedly conspiring to have them fired.
The lawsuit, filed in U.S. District Court in South Carolina by the $1.7 billion-asset bank's three founders and former leaders, claims that "several rogue" Certus directors conspired with Benjamin Weinger to destroy the executives' reputation and illegally fire them. The executives were dismissed by the board on April 9 amid allegations of gross mismanagement.
The plaintiffs Milton Jones, former executive chairman; Walter Davis, former chief executive; and Angela Webb, former president have accused CertusBank and Weinger of libel, defamation, civil conspiracy and illegally interfering with their employment contracts.
The executives were terminated less than two weeks after American Banker reported that they had overseen lavish executive expenditures and questionable related-party transactions while Certus suffered huge losses the past two years. A fourth founder, Charles Williams, resigned as co-CEO on March 31, just four days after the appearance of the American Banker article. Williams is not a plaintiff in the lawsuit.
The lawsuit includes many claims against Weinger, manager of hedge fund 3-Sigma Value, who sent a letter to investors last month calling for management's ouster. The lawsuit claims that Weinger engaged in a "campaign to defame the plaintiffs through the communication of half-truths and gross distortions which were rife with hateful and racial remarks and heinous stereotypes about African-Americans."
The alleged racist remarks in Weinger's shareholder letter included the use of the phrases "they gots to go" and "the ship be sinking," adding that such statements were an effort "to engender animosity toward or fear of the plaintiffs solely on account of their skin color."
The charges refer to a letter that Weinger sent to the bank's investors in early March, in which he claimed that the Certus executives had engaged in "spending exorbitantly on personal excess masked as corporate expense," and called for a special shareholder meeting to discuss naming a new board. Weinger's fund is one of about 25 hedge funds that committed a total of $500 million to back CertusBank in 2010. The bank also received support from key Congressional Democrats in its bid for a bank charter.
American Banker unearthed the dispute between Certus' executives and some of its investors in a March 29 article. The report detailed that the Certus executives had paid nearly $10 million to a consulting firm that the executives had founded and owned; that the bank had spent millions on executive apartments, charter-plane flights, sporting events and office decorations; that the bank had spent $146,000 for three months of work by one of the founders' sons, a recent college graduate; and that the bank had transferred a Toyota SUV to one of its executives at what appears to be far less than its market value.
The lawsuit claims that, following the publication of the American Banker article, the company's board barred the executives from responding publicly. The board later gave Jones, Davis and Webb 15 minutes to decide whether to resign or be fired from their positions, the lawsuit claims.
"Their replacement was in downtown Greenville and already possessed business cards indicating his new position as interim president," the lawsuit alleges, presumably referring to John Poelker, whose hiring was announced in conjunction with the other executives' dismissal. "Upon information and belief, he was just waiting for the phone call to confirm that the deed had been done."
The lawsuit references several alleged improper actions by directors, implying that several board members resisted the executives' plan to close underperforming branches because the offices were "located in [the directors'] back yards." The lawsuit also claims that the board's compensation committee issued stock awards to themselves without the rest of the board's knowledge and that directors hired friends and family members for cushy jobs at the bank.
The ousted executives also claim that the board pushed through a $1.8 million bank donation to a South Carolina business school, of which one director was the dean. The lawsuit also claims that the board pushed Certus to sponsor the "Bob Wright Golf Tournament," the namesake of director Robert Wright, who was named chairman after the founders were ousted.
Weinger, as of press time, had not seen the lawsuit and would not comment. Efforts to reach Certus were unsuccessful.