A lawsuit filed in New York Supreme Court accuses the directors of Cadence Bank of misleading shareholders for personal profit.
The class action suit brought by RSD Capital — filed in New York because Cadence”s stock is traded on the Nasdaq stock exchange — alleges Cadence Chairman and Chief Executive Officer Lewis Mallory Jr., President and Chief Operating Officer Mark Abernathy, Cadence Financial Corp., Community Bancorp LLC, and 10 additional members of Cadence”s board of directors concealed details in a proxy statement to public shareholders in order to complete “a transaction which protects and advances the interests of Cadence”s management team who are using this opportunity to benefit themselves.”
Donna Rupp, communications manager for Cadence, stated the suit was “without any merit” and shareholders will receive information regarding the suit in a forthcoming proxy. Mallory and Abernathy were unavailable for comment.
The suit, filed Oct. 28, revolves around the agreed sale of Cadence to Community Bancorp LLC in September. The deal pays shareholders $2.50 cash per share while an alternative deal with Trustmark Corp. would have provided shareholders with Trustmark stock valued at $2 per share.
RSD Capital”s attorney, Richard Brualdi, did not return phone calls seeking details on the suit. It is currently unknown how many, if any, shareholders have joined in the class action suit.
Cadence”s directors are accused of selling the company because it was unable to repay the government $44 million received through the Troubled Asset Relief Program. However, the suit states Mallory and Abernathy stand to receive three times their base salaries and one year”s worth of medical premiums after turning over control, but will remain employed if the previous payments violate regulations.
The bank is also criticized for performing an in-house evaluation of whether or not to sell the company with the assistance of a securities broker and failing to disclose details of the study in the proxy statement to shareholders, which recommended voters approve the merger of Cadence and Community Bancorp.
For instance, the securities broker, Keefe, Bruyette & Woods Inc., may stand to profit from the sale as it “purchase(s) securities from and sell(s) securities to Cadence and CBC.”
Additional details omitted from the proxy statement include the bank”s projected worth, how many potential buyers were contacted prior to the merger, how many expressed interest in acquiring Cadence and the criteria used to select those potential buyers.
The suit seeks compensatory damages and attorney”s fees.
Jason Browne was previously a reporter for The Dispatch.
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