Law Firm Announces Class-Action Lawsuit Against Sterling Financial
SEATTLE, WA, January 21, 2010 -- A former employee of Spokane-based Sterling Savings Bank (NASDAQ:STSA), has filed a class-action lawsuit claiming the bank and its holding company, Sterling Financial Corporation failed to protect employees' investment in company stock through the company's 401k Plan. The suit filed by Hagens Berman Sobol Shapiro at the U.S. District Court replaces a similar suit filed on Jan. 11, 2010, which the firm dismissed at the request of Cory Deter.
"Employees often interpret a match in company stock as an endorsement of the company and its stock. In this case, Sterling matched the stock employees invested in the 401k plan with worthless Company Stock, further putting the pension fund at risk."
Attorneys representing plaintiff Philip Laue believe that Sterling stock price has imploded as the result of ill-advised commercial real estate, construction and land loans, improper accounting and inadequate capitalization. Sterling and other defendants failed to properly manage 401k funds by maintaining a large investment in Company Stock long after the stock became an imprudent investment - a violation of the federal Employment Retirement Income Security Act (ERISA), the complaint states.
"No qualified financial advisor would encourage rank-and-file employees to invest more than a modest amount of retirement savings in company stock, but actually advise against it," said HBSS managing partner Steve Berman. "Employees often interpret a match in company stock as an endorsement of the company and its stock. In this case, Sterling matched the stock employees invested in the 401k plan with worthless Company Stock, further putting the pension fund at risk."
Berman said the bank failed to disclose the company's massive 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 401k from July 23, 2008, to the present.
The plan heavily invested in Sterling stock despite a clear decline in performance. As of Dec. 31, 2007, the plan held approximately $16 million in Sterling common stock. A year later, Dec. 31, 2008, the plan held approximately $13 million in Sterling common stock, representing in excess of 20 percent of the assets of the pension plan.
In the wake of its diving stock performance, Sterling allegedly failed to adequately and timely record losses for its impaired loans and secure assets to safeguard against its defaulting credit portfolio. As a result, Sterling stock traded at artificially inflated prices during the class period, reaching a high of $14.72 per share on Oct. 1, 2008, the lawsuit states. As of last Friday, the beleaguered stock closed at 70 cents per share.
Sterling Bank is one of the largest commercial banks headquartered in Washington. It is one of the largest regional community banks in the U.S. that offers mortgage lending, construction financing and investment products to individuals, small business and commercial organizations and corporations. Golf Savings Bank, a branch of Sterling, focuses on the sale of single-family residential mortgage loans.
HBSS, a Seattle-based class-action law firm experienced in ERISA and securities litigation, estimates over 2,500 employees in Washington, Oregon, Idaho, Montana and California are affected by the actions listed in the complaint.
The lawsuit charges that Sterling deliberately misled employees and investors and mismanaged its pension plan on a number of fronts, noting specifically that Sterling:
- Failed to account for and disclose Sterling's commercial real estate, construction and land development loans and failed to reflect impairment in the loans;
- Failed to adequately reserve for loan losses, such that Tier 1 capital was presented in violation of banking regulations and Generally Accepted Accounting Principles (GAAP). As a result, Sterling would be forced to consent to a cease and desist order from the Federal Deposit Insurance Corporation (FDIC) directing it to raise $300 million in capital;
- Failed to adequately account for its goodwill or its deferred tax assets such that its financial statements were presented in violation of GAAP.
This new lawsuit filed against Sterling Financial Corp. supersedes the Jan. 11, 2010 complaint filed by HBSS and Brodsky & Smoth, LLC, which has been dismissed.
About Hagens Berman Sobol Shapiro
Hagens Berman Sobol Shapiro (HBSS) is a law firm with offices in Seattle, Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Named to the 2006 and 2009 Plaintiffs' Hot List by National Law Journal, HBSS has developed a nationally recognized practice in class-action litigation. The firm has co-lead counsel in litigation to recover losses from Enron employees' retirement funds and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. The firm also served as counsel in several other high-profile cases including the Washington Public Power Supply litigation, which resulted in settlements of nearly $1 billion. The firm also served as co-lead counsel in a VISA/Mastercard litigation which resulted in excess of a $3 billion settlement.
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