An independent investigation at HopFed Bancorp has cleared the Hopkinsville, Ky., company's CEO of allegations that he had participated in questionable insider dealings.
Stilwell Group claimed in May that John Peck, who is also HopFed's president, had bought at least two properties from Gilbert Lee, a former company chairman who chaired the board's compensation committee when the transactions allegedly took place. Stilwell, HopFed's biggest shareholder, claimed that the transactions represented a conflict of interest.
The $902 million-asset HopFed responded by forming a special committee of three independent directors to investigate the claims. HopFed's outside counsel, George Carter of Carter & Carter Law Firm, and Jones Walker assisted with vetting each director's independence.
That committee, which concluded its investigation earlier this month, “unanimously” found that Peck’s purchase of the properties were “not material” to Lee and “played no role in influencing” Peck’s compensation, HopFed said in its a Friday regulatory filing. The committee also found that Peck’s personal real estate investments did not distract him from serving as HopFed's leader and a decision to lease warehouse space from Peck was “entirely fair to the company."
The investigation also determined that there was no conflict with Carter representing Peck when he bought real estate because Carter’s compensation as a HopFed lawyer did not depend on his work for Peck.
Stilwell and HopFed have had a long-running dispute. Stilwell has complained about Peck’s salary and a bank acquisition that was eventually called off. The firm successfully nominated a representative to the board in 2013, though the individual eventually stepped down.
Stilwell filed a lawsuit against HopFed after the company changed its bylaws to bar anyone with a consent order with the Securities and Exchange Commission from pursuing a board seat. Though HopFed removed the barrier after the lawsuit was filed, it was recently ordered to pay more than $600,000 in Stilwell's legal fees.
Stilwell, in a Monday filing, accused Carter and Edward Crosland Jr., a lawyer at Jones Walker, of legal malpractice tied to their handling of the bylaw change. The firm demanded that HopFed file a lawsuit against the attorneys to seek damages "in excess of $1 million." The investor also said it plans to nominate a candidate to run for board election at HopFed's 2018 annual meeting.
Calls to Carter and Crosland were not immediately returned.
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Corrected March 1, 2018 at 3:31PM: An earlier version of this story misstated one of the conclusions of HopFed's independent committee. It determined that CEO John Peck's personal real estate investments did not distract him from serving as the company's leader.