Directors for a U.S. Century Bank in Florida are bracing themselves for another class-action lawsuit this month after accusations surfaced that they had "squandered" taxpayer TARP funds by allegedly bailing out the business ventures of current and former directors.
Unlike the class action filed in November against the company, which included six U.S. Century Bank shareholders, this new class action will include approximately 400 minority shareholders including professionals and small business owners. According to the complaint filed in a Florida District Court, the shareholders are accusing the bank of not only breaking their fiduciary agreement with shareholders, but also using taxpayer funds for personal profit.
U.S. Century Bank denies the accusations and has vowed to fight the lawsuit filed in November for breach of contract against the bank as well as a shareholder derivative action.
Some financial and business law experts suggest that these shareholder disputes may be a clever ploy to get money out of a company that is already low on capital. Because of this, the bank may be forced to tap into the $20 million directors and officers liability insurance policy that pays out claims in such an instance.
Some critics have pointed out that because of the seriousness of the accusations, it's likely that the FDIC is already looking into the allegations to find out if they have any merit. With many of the former and current directors being successful businessmen, the worry is that accusations such as this could have significant negative consequences for those involved. Because of the complexities of securities law, it will be important for the bank to consult their attorneys who can make sure that their rights are being protected too.
Source: The South Florida Business Journal, "U.S. Century Bank, directors hit with new class action lawsuit," Brian Bandell, Jan. 17, 2013