The news account said the federal court suits allege that founder Robert Lowder and other Colonial Bank officials improperly kept most of the plan’s assets in company stock causing the plan to lose $50 million when the bank collapsed. The company’s share value went from nearly $25 per share in 2007 to less than 10 cents after the bank was taken over by regulators this summer (see Ala. Bank Hit with Stock Drop Charges ).
“Many of them had their retirement savings disappear. Many of them had worked for Colonial for years and years,” Joe Whatley of Birmingham, one of the attorneys filing the lawsuits, told reporters
The eight lawsuits name as defendants Lowder and other members of the board of directors, including former Auburn football coach Pat Dye and dog track magnate Milton McGregor. Attorneys for both sides have filed motions seeking to consolidate the eight lawsuits into one case.
Alabama banking regulators shut down the Montgomery-based Colonial BankGroup Inc. on August 14. The bank’s $20 billion in deposits and about $22 billion of its assets were sold to BB&T Corp. Colonial’s 346 branches in Alabama, Florida, Georgia, Nevada, and Texas reopened as offices of BB&T.
The lawsuits say the retirement savings plan continued to invest heavily in Colonial stock even as signs of trouble loomed and the stock price began dropping, according to the news account.
“The bank was financially mismanaged and it engaged in highly risky and inappropriate loan origination practices, creating dire financial circumstances that exposed the plan to risk of huge losses,” according to the lawsuits, which are all similar, the AP said.
« IRS DB Funding Guidance Is "Good News"