Belmont of Ohio Sues Fraud Bond Firm
An Ohio community banking company that claims its former chief operating officer embezzled it out of more than $20 million is suing an insurer for refusing to pay on the loss.Last fall $316 million-asset Belmont Bancorp in Bridgeport, Ohio, sued the former executive, William Wallace, claiming that he had defrauded it through a "complex financial scheme." And last week it sued Progressive Casualty Insurance Corp. of Cleveland for refusing payment on a $4.75 million fraud bond.
Belmont claims Mr. Wallace made a series of "improper, dishonest, imaginary and fraudulent loans" to a New Philadelphia, Ohio, building company, Schwartz Homes Inc., which went out of business last April. The money, which was supposed to help Schwartz customers finance new homes, went directly to Schwartz executives instead, Belmont said.
Upon learning of the deception, it said, it sought payment from Progressive Casualty. The Progressive bond is to supposed to offset losses from "dishonest and fraudulent acts committed by an employee acting alone or in collusion with others," Belmont said.
When Progressive investigated the claim, Mr. Wallace withheld material information, Belmont claims. He also provided false information, and Progressive knew it was false, the banking company says.
Progressive refused pay, even after Belmont last September submitted what it says was proof of loss - more than 60 pages of text, "thousands of pages" of documentary evidence, and sworn statements from witnesses.
The banking company is seeking payment on the bond as well as a total of $25 million in compensatory and punitive damages from Mr. Wallace and Progressive.
Belmont and Progressive refused to discuss the case with American Banker.
- Eric Winig
Chicago's Midcity to Spin Off Tex., Okla. Banks
A $1.8 billion-asset Chicago banking company that recently said it plans to go on a buying spree now says it will spin off its Texas and Oklahoma banks.Midcity Financial Corp., the parent of three Chicago-area banks, said last week that it plans to sell two non-Illinois subsidiaries: $311 million-asset Union Bank and Trust Co. in Oklahoma City and $89 million-asset Abrams Centre Bank in Dallas.
Shareholders could take stock in the new companies or retain their Midcity stock.
Midcity said it plans to focus on growth in the Chicago area. In late March, having publicly flirted for three months with selling itself to a larger bank, it announced plans to search for community banks to acquire.
After the spinoff, the company said, it will split its thinly traded stock 120-for-1 and seek a Nasdaq listing. The stock last traded Dec. 31 - at $6,100 a share.
Regulatory approval for the spinoff and stock split are expected to take six months, the company said.
-Craig Woker
Exam Forces City Holding of W.Va. to Restate
City Holding Co. of Charleston, W.Va., restated earnings last week after regulators forced it to add $6 million to reserves.The $2.8 billion-asset company chopped 1999 earnings by 39%, to $6.2 million; the per-share figure dropped to 37 cents. And the previously stated fourth-quarter loss was boosted 89%, to $8.3 million, or 49 cents a share.
The revision followed an examination of its lead bank, City National Bank of West Virginia. The boost in reserves was ordered "for various qualitative and general economic factors" and to bring the overall allowance for loan losses "to a level more consistent with the bank's peer group." City Holding said.
Last year the company added $5.9 million to reserves to address credit quality concerns.
