Florida Bank insiders shafted minority investors in sale to IberiaBank, suit says

in Local Courts/Top Headlines by

Minority investors in a Tampa Bay-area bank are accusing the board and other insiders of shafting them by manipulating share values before the bank’s sale to a Louisiana firm.

Tampa-based Florida Bank Group – the holding company operating under the name Florida Bank – received millions in federal Troubled Asset Relief Program TARP funds after losing $137-million between 2007 and 2013.

Florida Bank, originally the Bank of St. Petersburg, had been operating since 1985, and now has nine offices in Hillsborough, Pinellas and Manatee counties, as well as 13 offices throughout Florida. Robert Rothman was Florida Bank’s president and CEO, later replaced by Susan A. “Susie” Martinez.

TARP is the federal program set up by Congress in 2008 to stabilize banks holding large amounts of bad loans.

James Lewis Wilkes II and Timothy Charles McHugh are the namesakes of Tampa-based law firm Wilkes & McHugh, a Tampa-based law firm founded in 1985. The firm is most noted for suing nursing homes for negligence. Wilkes & McHugh also operate offices in Pennsylvania, Kentucky and Arizona.

When Florida Bank announced a private placement of additional stock in 2013, several investors – including Wilkes and McHugh – said they “could not conceive of chasing good money after bad.”

In late 2014, the Tampa Tribune reported that Florida Bank Group was to be acquired by Louisiana-based IberiaBank Corp. for $90-million. After the deal had been finalized in early 2015, Martinez was named IberiaBank’s Florida regional president. Rothman stayed on as board chair.

In a breach-of-fiduciary-duty suit filed Feb. 13 in Hillsborough County Circuit Court, the plaintiffs – Wilkes, McHugh, firm attorney Bennie Lazzara Jr. and his wife, Joyce – claim they didn’t know that Florida Bank’s 2013 private placement, another in 2011, as well as incentives and other stock programs were designed to maximize shareholdings of the bank’s directors and officers.

The suit also accuses the bank of diluting holdings, so that bank insiders could make a killing in the sale to IberiaBank. Plaintiffs claim that in 2013, the private placement alone increased the number of outstanding common shares from 21-million to 212-million, with most of them acquired by insiders.

The plaintiffs also allege nearly a dozen bank insiders including CEO Martinez and chair Rothman put their own needs ahead of those outside minority investors, which they say lost a considerable amount of money in the sale.