A shareholder of a Bay City, Mich., thrift has accused its management of misleading the public about the use of risky investments and profiting from falsely inflated stock prices.
The class-action suit, filed last week against $864 million-asset Mutual Savings Bank, seeks unspecified damages.
Mutual "is in the process of evaluating and reviewing the complaint with counsel," it said in a press release.
The complaint was filed in U.S. District Court for the Eastern District of Michigan by Richard Schwabach for himself and others who bought Mutual stock between Nov. 30, 1993, and Nov. 14, 1994.
Named in the suit are four current and former officers, including Charles E. McCuistion, president.
Four directors were also named as defendants.
The plaintiff's law firm, Elwood S. Simon & Associates of Bloomfield Hills, Mich., specializes in shareholder litigation.
A new management team arrived at Mutual in 1990 and executed a business plan to focus on residential lending and halt risky investing that had led to losses and regulatory scrutiny in the late 1980s.
However, the lawsuit charges, the new management violated federal securities laws through misleading or false filings that distorted its compliance with the new plan.
After Mutual's initial public offering in July 1992 and an October 1993 rights offering, "defendants abandoned their stated business plan . . . and, instead, began engaging in similar, speculative, high-risk investment practices," the suit alleges.
It also alleged that certain officers and directors reaped substantial profits from their sale of Mutual stock using nonpublic information.
Mutual's stock price plunged from $18.25 per share Nov. 30, 1993, to $4.25 a share by Nov. 14, 1994.
In November 1994, Mutual acknowledged its recent high-risk investment practices, taking a $1.694 million loss for that year's third quarter.