Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, March 16, 1991 TAG: 9103160178
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: DANIEL HOWES BUSINESS WRITER
DATELINE: LENGTH: Medium
U.S. District Judge James Turk, citing similar cases elsewhere, said the suit "raises a suspicion" that it was filed "for its settlement value."
The shareholders - Elliott Dubowski of New York and Raymond Scher of Roanoke County - failed to prove that Dominion's executives defrauded shareholders and potential investors by merely contrasting quarterly and annual financial statements, Turk wrote.
"The court will not speculate that [Dominion] defrauded these investors just because Dominion suffered more losses than predicted," he said. "Dominion's officers and directors may well have thought the bank had adequate provisions for loan-loss reserves and the loan portfolio was well balanced."
The suits charged Dominion with deliberately concealing the quality of the bank's loan portfolio, underestimating any significant increases in non-performing assets and failing to increase its reserves for losses from bad loans.
Dubowski and Scher claimed in separate suits that investors who bought Dominion stock between Jan. 18, 1989, and May 10, 1990, paid artificially high prices. And those were inflated by the bank's alleged failure to disclose facts to shareholders.
"The case obviously had no basis," Warner Dalhouse, Dominion's chairman, said Friday. "We're delighted. Now we can get on to the business of running our bank. Nothing that was contained in this lawsuit had any effect on how we report to our shareholders."
Scher, a nurse for Blue Cross of Virginia, said he "would certainly endorse an appeal. Once we work out the ramifications, it would almost be a certainty."
Dalhouse suggested that the suit - the first of its kind filed against the 109-year-old bank - signaled a trend toward vengeance on the part of investors hurt by a slowing economy, declining interest rates and failing financial institutions elsewhere.
"It's what's generally referred to as a `strike suit' - it's value would be only in the settlement," he said.
Turk appeared unconvinced by the shareholders' argument, saying they failed to show how Dominion's financial reports were misleading. "That is," he wrote, the shareholders failed to show how Dominion "knew the loan-loss reserves were inadequate" or how it "ignored the increase in non-performing assets."
The shareholders "fail to plead facts which would imply fraud, nor do they give any indication they could prove" it.
by CNB