Shareholders Say Bank Failed on Purpose

OMAHA (CN) - Shareholders claim in court that an acting CEO deliberately mismanaged a bank so he could buy it on the cheap after the FDIC took it over.

John Murray and Jim Fitl, as co-trustees of the Murray/Fitl Children's Trust, sued former Mid City Bank manager Greg Stine, Premier Bank fka Purdum State Bank, and several members of Premier Bank's Board of Directors, in Douglas County Court.

Murray and Fitl, who are shareholders in an Omaha-based bank holding company which formerly owned Mid City Bank, claim Stein was hired to rehabilitate the bank, but instead reduced its assets and contributed to its collapse.

"(I)t was the intention of Greg Stine, at all times after he began managing the bank, to acquire ownership of the bank," according to the complaint in Douglas County Court.

The plaintiffs say the board of directors mismanaged Mid City Bank for years and ignored a 2009 FDIC consent order which required it to correct management deficiencies and improve operations.

After the FDIC classified Mid City Bank as a "problem bank" in 2010, the board hired Stein to manage it and help rehabilitate it, according to the complaint.

But the plaintiffs say Stein mismanaged Mid City Bank on purpose, so he and his family could acquire it.

While acting as the bank's CEO and president, Stein did not become a board member, but the board gave him full control of the bank, acted on his recommendations and approved his actions, according to the complaint.

"During the time Greg Stine was the acting manager of the bank he made several decisions which were detrimental to the goal of maintaining Mid City Bank as a viable financial institution," the complaint states. "These acts include but are not limited to:

"A. Failing to protest increased tax valuations on commercial properties held by Mid City Bank;

"B. Selling commercial properties far below their assessed and/or market values;

"C. Spending the bank's operating funds on unnecessary consultants and equipment, including hiring his wife to redecorate certain bank offices and hiring a consultant to do personality testing on existing bank employees;

"D. Failing to maintain good relations with large depositors;

"E. Interfering in the bank's ability to conduct day-to-day banking activities;

"F. Failing to take advantage of opportunities to relieve the bank of non-performing loans."

The plaintiffs claim the bank had 10 prospective buyers in June 2011, but did not sell. They say the bank rejected firm offers without negotiating or making counteroffers.

"On information and belief, information packets, which were a prerequisite to offers on the bank, were never given to certain prospective buyers, precluding them from making an offer to purchase the bank as an ongoing entity," the complaint states.

The shareholders claim that if the bank had been sold, the FDIC would not have stepped in as receiver, but its condition continued to deteriorate under Stein's management, until the FDIC took it over.

After the bank was placed in receivership, the shareholders say, Stein used Purdum State Bank, a Nebraska bank he had bought, to take over Mid City Bank's assets.

"On information and belief, Greg Stine acquired the ownership interest in Mid City Bank from the FDIC through Purdum State Bank for a fraction of the price he would have had to pay if he had purchased the bank prior to the FDIC becoming receiver," the complaint states.

The plaintiffs claim Stine's mismanagement and the board's lack of oversight caused shareholders' stock in the managing corporation to become virtually worthless.

They claim that "Stine knew that reducing the bank's assets would increase the likelihood that the bank would go into receivership."

They seek reimbursement, an accounting, and damages for breach of fiduciary duty, unjust enrichment and conflict of interest.

They are represented by James Sherrets, with Sherrets Bruno & Vogt.

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