Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, December 21, 1994 TAG: 9412220033
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: MICHAEL STOWE STAFF WRITER
DATELINE: LENGTH: Medium
The shareholders - Raymond Scher of Roanoke County and Elliot Dubowski of New York - claimed in the suit that the former Roanoke-based Dominion Bankshares Corp. deliberately concealed the poor quality of its loan portfolio. They said the bank underestimated significant increases in nonperforming assets - those that fail to produce income - and neglected to increase reserves set aside to compensate for losses from bad loans.
As a result, the shareholders claimed in the suit, unsuspecting investors who bought Dominion stock between March1989 and July1990 paid artificially high prices.
In December1992, U.S. District Judge James Turk certified the suit as a class action, meaning that anyone who purchased Dominion common stock between March6, 1989, and July17, 1990, is eligible to receive part of the settlement.
First Union Corp. acquired Dominion in March1993 and inherited the suit along with other bank business.
The suit was settled in October, but the agreement was not filed in U.S District Court until late Monday.
Without admitting any wrongdoing, the bank has agreed to put $5 million in an escrow account to pay eligible stockholders.
Leonard Barrack of Philadelphia, the lead attorney representing the stockholders, said the settlement is a good one.
"On behalf of the stockholders," he said, "we are delighted with the settlement and hope that the judge approves it."
First Union's attorney, Douglas Densmore of Roanoke, and company spokesman Dave Scanzoni declined to comment on the settlement, saying the agreement prohibited it.
Turk will hold a hearing March20 to decide whether the settlement is fair and whether Barrack's fees should be deducted from the settlement fund.
The bank settled, according to the agreement filed with the court, to "end substantial expense, inconvenience and distraction of continued litigation."
Shareholders participating in the suit will be compensated for their losses in one of two ways: anyone who purchased and sold stock between March6, 1989, and July17, 1990, will be paid the difference between the purchase price and sale price; anyone who purchased stock during that period, but still owned it after July17, 1990, will be paid the difference between the purchase price and $10.75, the closing price of Dominion common stock on July17, 1990.
Stockholders will be paid in full unless claims totaling more than $5 million are filed, according to court papers. If that happens, stockholders will receive only a percentage of their claim.
Barrack said he didn't know how many stockholders were eligible to file claims. Scanzoni said the bank wouldn't provide that number because litigation in the case was pending.
Turk has ordered that all eligible stockholders who can be identified through Dominion's stock records be informed of the settlement agreement by Dec.30. The judge also ordered that notices of the settlement be published in newspapers, including the Roanoke Times & World-News, by Jan.6. Eligible stockholders who want to exclude themselves from the suit must file notice by Feb.15. Those who want to share in proceeds must submit a claim before May1.
Dubowski and Scher filed separate lawsuits, which were later consolidated, soon after Dominion announced a $14.7 million loss and its plans to implement a restructuring plan in October1990.
The settlement was a surprise considering that in March1991, Turk dismissed the suit, writing that it raised the suspicion of being filed for "settlement value." He said Dubowski and Scher had failed to prove that Dominion's executives had defrauded shareholders and potential shareholders.
Three months later, Turk refused to dismiss a second lawsuit filed by the defendants. It went into greater detail about alleged fraud by Dominion.
by CNB