Shareholders of a tiny Ohio bank have sued its founders, seeking to recover their initial $4.5 million investment.
Towne Bancorp, Perrysburg, Ohio, began selling shares to the public in August 1992 and planned to close the public offering by Dec. 31, 1992. Unable to raise the needed funds by that date, the company applied for several extensions from the Securities and Exchange Commission and opened its subsidiary bank in October 1996.
The class action, filed in the Western Division of U.S. District Court in Northern Ohio, comprises more than 700 shareholders who bought stock in the company from August 1992 through June 1998.
The suit alleges that Towne Bancorp's officers violated securities laws by not updating shareholders on the status of the public offering and the company's overall financial health. The alleged violations entitle Towne Bancorp shareholders to refunds, the suit claims.
"There are certainly rules you have to follow when you are raising money" in a public offering, said Charles D. Niehaus, a Toledo attorney representing the plaintiffs, "and they didn't play by those rules."
The defendants have not yet responded to the charges. An attorney for the seven defendants, including former president and chief executive officer Jerome C. Bechstein, did not return telephone calls seeking comment.
Towne, which had $20 million of assets, was sold in June to Exchange Bancshares, Luckey, Ohio, for $2 million.