A news release from Hagens Berman Sobol and Shapiro, one of the law firms representing plaintiffs, said the lawsuit notes that Sterling’s stock price has imploded as the result of commercial real estate, construction and land loans, improper accounting, and inadequate capitalization. It claims Sterling and other defendants failed to properly manage retirement funds by maintaining a large investment in company stock long after the stock became an imprudent investment, in violation of the Employee Retirement Income Security Act (ERISA).
Steve Berman, a managing partner at Hagens Berman Sobol and Shapiro, contended in the press release that the bank’s matching contributions in company stock, was interpreted by employees as an endorsement of the investment and further put their retirement funds at risk.
Berman said the bank failed to disclose the company’s financial problems caused by inadequately secured loans in commercial real estate, construction and land loans, and masked by allegedly improper accounting. The lawsuit charges that the company deliberately misled employees and shareholders on the value of the stock and failed to secure adequate reserves against its credit portfolio.
Employees in the class include those who owned stock in the Sterling 401(k) from July 23, 2008, to the present. Attorneys for the plaintiff estimate over 2,500 employees in Washington, Oregon, Idaho, Montana, and California are affected by the actions listed in the complaint.
According to the press release, on December 31, 2008, the plan held approximately $13 million in Sterling common stock, representing in excess of 20% of the assets of the plan. The suit claims Sterling failed to adequately and timely record losses for its impaired loans and secure assets to safeguard against its defaulting credit portfolio, and as a result, Sterling stock traded at artificially inflated prices during the class period, reaching a high of $14.72 per share on October 1, 2008. As of last Friday, the stock closed at 70 cents per share.