Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, March 21, 1995 TAG: 9503210133
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: JAN VERTEFEUILLE STAFF WRITER
DATELINE: LENGTH: Medium
But more than $2 million of that money will go to pay shareholders' attorneys for fees and expenses. The rest will go to settle claims by all qualified shareholders.
Eligible shareholders - those who bought and sold stock in Dominion between March 6, 1989, and July 17, 1990 - have until May 1 to file claims for a share of the settlement.
"We're happy the matter has been settled," said First Union attorney Douglas Densmore, adding that the bank felt it was a fair resolution to the lawsuit. He declined to say more, citing a confidentiality agreement that was part of the settlement.
The lawsuit first was brought by two shareholders - Raymond Scher of Roanoke County and Elliot Dubowski of New York - who claimed 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 - which produce no income for the bank - and failed to increase the amount of money set aside in reserves to compensate for losses from bad loans.
Therefore, the suit alleged, investors who bought Dominion stock between March 1989 and July 1990 paid artificially high prices as a result.
In October 1990, Dominion posted a $14.7 million loss and announced plans to implement a restructuring of its business.
First Union Corp. acquired Dominion in March 1993 and inherited the suit along with other bank business.
Dubowski and Scher initially filed separate lawsuits, which later were consolidated and, still later, made into a class-action suit, meaning anyone who bought common stock during the period in question is allowed to participate in the settlement.
One question left unresolved is how former Dominion employees who bought stock through savings and stock-purchase plans can participate in the settlement. Employees weren't told how many shares were purchased through such plans, instead getting a "unit" tally, said former Dominion worker Charles Spencer. He said the savings plan still is administered by First Union.
Spencer showed up for the 10:30 a.m. hearing in U.S. District Court, but it was held early and was over by the time he arrived at 10:15. He was hoping to find out how employees who bought stock through the plans were going to be notified of their shares.
"I suspect a fair number of people are in the same situation," he said.
Densmore said an administrator hired by the shareholders would handle all claims. He would not say how many shareholders potentially could participate in the settlement, saying it was up to the administrator to find them all.
Stockholders will be paid in full unless the claims filed total more than the settlement, according to court papers. If that happens, stockholders will receive a percentage of their claim.
Without admitting any wrongdoing, the bank has agreed to put $5 million in an escrow account to pay eligible stockholders. Densmore said the money could be deposited as early as 35 days from now.
Shareholders participating in the suit will be compensated for their losses in one of two ways: Anyone who purchased and sold stock between March 6, 1989, and July 17, 1990, will be paid the difference between the purchase price and sale price. Or anyone who purchased stock during that period, but still owned it after July 17, 1990, will be paid the difference between the purchase price and $10.75, the closing price of Dominion common stock on that day.
U.S. District Judge James C. Turk retained jurisdiction over the administration of the settlement, which can be rendered null and void if not implemented in accordance with the terms he approved.
by CNB