Ex-TierOne employee files lawsuit, saying stock in the bank was bad retirement-plan investmentBy Josh Funk, AP
Thursday, July 8, 2010
Ex-TierOne employee: Bank stock was bad investment
OMAHA, Neb. — A former TierOne Bank employee says the people who oversaw the company’s retirement plans should have known TierOne Corp. stock was a bad investment long before federal regulators took over the bank and sold its assets last month.
Susan Bredthauer filed a federal lawsuit Wednesday against TierOne’s former directors, its employee benefit committee and the company that oversaw the retirement plans, Principal Trust Co. The lawsuit could become a class action.
TierOne had losses in 10 of the last 11 quarters as it struggled under the weight of bad loans in areas of the country hit hard by the subprime mortgage crisis. Yet the bank’s retirement plans held more than 2 million shares of TierOne stock.
The Federal Deposit Insurance Corp. took over Lincoln-based TierOne in early June, and Great Western Bank, of Sioux Falls, S.D., agreed to acquire the bank. All of TierOne’s branches are now Great Western branches.
Principal Trust spokeswoman Jamie Naig said the company had not received a copy of the lawsuit and could not immediately comment on the case Thursday. TierOne’s corporate offices are closed, and no one answered the phone there.
The lawsuit, filed by Lincoln attorney David Rowe, says the TierOne officials and Principal Trust had a fiduciary duty to protect participants’ investments. But Rowe said in the lawsuit that those officials failed to act after TierOne faltered because of financial mismanagement and inadequate reserves.
“The company and several of the defendants hid the true extent of TierOne’s financial distress and that financial collapse was more than merely possible, but imminent,” Rowe said in the lawsuit.
The TierOne stock held in the 401k retirement plan and employee stock ownership plan was worth $46.8 million at the end of 2007 when the stock traded for $22.15. By the end of last month, TierOne’s stock sold for 6.5 cents per share, so the retirement plans’ holdings were worth $149,954.
During the time period cited in the lawsuit, TierOne also tried to sell itself to commercial lender CapitalSource Inc., but that deal fell apart in 2008 after turmoil in the credit markets and regulatory delays. Falling stock prices trimmed the value of the deal from $652 million when it was announced to $322 million when TierOne’s parent company backed out.
Tags: Nebraska, North America, Omaha, Ownership Changes, United States