A South Carolina court has dismissed a shareholder lawsuit that alleged three Carolina First Corp. executives had unfairly profited from a deal with a technology start-up firm.
Mack I. Whittle Jr., president and chief executive officer of Greenville, S.C.-based Carolina First, applauded the decision, which was issued Monday by the Greenville County Court of Common Pleas.
Since the complaint was filed a year ago, the defendants have maintained that the charges are "irresponsible and without merit." "We are pleased with this outcome," Mr. Whittle said. "We believed all along that we were right."
Investors reacted favorably to Carolina First's announcement Wednesday that the lawsuit had been dismissed. In Nasdaq trading, Carolina First stock was up 13.58%, to $23 a share.
But an attorney for the plaintiffs, three shareholders, hinted that an appeal is possible.
"A motion to dismiss is based on the pleadings only; it does not concern itself with the examination of the facts," said John A. Hagins Jr., a Greenville lawyer who represents plaintiffs Emily Lester, Beatrice Hutchinson, and John Wesley Purdie Jr.
According to documents filed in November 1996, Carolina First received a 23% stake in Affinity Technology Group Inc., Columbia, S.C., when it went public in April last year, in exchange for interest owed on loans as well as fees for business consultation.
Affinity makes bank technology products, including an automated loan machine. Carolina First, with $2.1 billion of assets, was one of the first banking companies to use Affinity's ALMs.
The lawsuit alleged that the bank never profited from its stake in Affinity, as claimed in a June 1996 press release, but that the three executives did. In addition to Mr. Whittle, the defendants were executive vice president William S. Hummers 3d and chief operations officer Stephen Powell.
According to the suit, the three executives received 666,634 shares of Affinity stock - or 13% of First Carolina's stake-as a bonus for leading the bank to Affinity. Under terms of the bonus agreement, the complaint said, the executives were allowed to sell their shares but the banking company had to hold on to its stake.
It is unclear whether the executives cashed in their shares, which were worth as much as $13 million in June 1996, when Affinity was trading at roughly $20 per share. At that time, the bank's stake was worth $120 million.
By the time the suit was filed, the stock was trading at about $8 per share. Affinity's stock closed Wednesday at $2.625 per share.