A shareholder at Jefferson Savings Bancorp has filed a class action against six officers and directors of the Ballwin, Mo., thrift, claiming that they falsely pumped up Jefferson's stock price while selling off shares themselves.
The lawsuit, filed Tuesday by Richard P. Paletta of the Paletta Law Firm in St. Louis, also names Prudential Securities Inc. and a broker, James S. Hofman, who worked as Jefferson's adviser. It seeks unspecified damages for the lead plaintiff, investor Dean West, and other parties who bought Jefferson shares between Jan. 1, 1998, and April 14, 1999.
Jefferson is the $1.5 billion-asset parent of Jefferson Heritage Bank, which has 29 branches in Texas and Missouri. The complaint alleges that the defendants issued false and misleading statements concerning Jefferson's potential earnings and possible sale to a larger bank company.
Jefferson's stock price has tumbled more than 60% since reaching its all-time of $31.88 in May 1998. It was trading at $12 midday Friday. Its return on assets for 1998 was 0.6%, compared with an average of 1.08% for all midwestern thrifts.
The plaintiffs are requesting a jury trial, according to an official at the clerk's office of the U.S. District Court in East St. Louis, Ill., where the case was filed. The suit was filed Monday, with Mr. West as the only plaintiff and was amended to class-action status the next day.
It was not immediately known how much Mr. West had invested. Mr. Paletta did not return numerous phone calls on Thursday.
Besides Prudential and Mr. Hofman the defendants named in the suit are David V. McKay, Jefferson's chairman and chief executive officer; Paul J. Milano, treasurer and chief financial officer; and directors William W. Canfield, Lloyd D. Doerflinger, Frank C. Bick, and Edward G. Throop.
Mr. McKay was unavailable for comment, and another bank official declined to comment. A Prudential Securities spokesman also declined to comment. Attempts to reach Mr. Hofman were unsuccessful.
One Jefferson shareholder not involved in the case said he might be interested in joining the class action. Joe Siegert, a Grayville, Ill, financial consultant, agreed that the defendants had circulated rumors that the company was considering selling to a larger competitor. The name most frequently bandied about was Union Planters Corp. of Memphis.
With the rumors circulating that Union Planters might buy Jefferson, it added to the reasons that I thought it would be a good investment, Mr. Siegert said. He said he thought Jefferson might be a perfect fit'' for Union Planters, and that the two banks could consolidate and improve earnings. There were a lot of people who were potentially misled.
Union Planters entered the St. Louis market last year when it acquired Magna Group Inc. for $2.25 billion.
Jefferson's board has had run-ins with shareholders before. Earlier this year, Mr. Siegert and a group of investors led by Harrisburg, Ill., car dealer Gary Holland launched a proxy fight to replace the current board with its own slate of directors.
The company eventually reached a compromise with the group by appointing Mr. Holland and another dissident, Nashville, Ill., attorney Brad Barkau, to the board.