BRIDGEPORT, Conn. -- Shareholders who filed a lawsuit accusing Shawmut National Corp. of failing to disclose its financial difficulties may be issued stock warrants in a settlement.
Shawmut has proposed setting up a settlement fund consisting of $4.95 million in warrants, which would give the shareholders the right to buy common stock at a given price.
A hearing on the proposal is scheduled for Oct. 23 in U.S. district court in Bridgeport. Shawmut's Connecticut National Bank in based in Hartford.
Disclosure at Issue
Two class actions were filed -- by Gary Steiner, Kenneth Steiner, and Leonard Shapiro in March 1990; and by Ilse Zimmerman in March 1991.
They claimed that Shawmut failed to properly disclose its financial condition as the region's economy started to slide.
What was disclosed allegedly caused the shareholders to buy stock at inflated prices that later plummeted, causing severe losses.
As the real estate market went into decline, Shawmut lost $133 million in 1990 and $170.7 million in 1991. Its financial condition has since improved.
Shawmut spokesman Brent S. Di Giorgio said the bank denies the allegations but proposed a settlement to avoid a long legal fight.
The bank would distribute the warrants according to a formula based on the time at which the shareholders bought the stock, said Barry Weprin, a New York lawyer representing the Steiner plaintiffs.
Warrants would be distributed among shareholders who bought stock the day Shawmut announced its second-quarter results for 1989; when the bank revised earlier statements about its financial condition; and when the bank said it was adding to its loan loss reserves.