They were just five officers at SunBank of Pasco County in early 1992, working to turn around their east Pasco bank after some tough economic years.
Dennis Moses, Tim Pierson, Bayne Rounds, Ralph Cumbee and Brian Killory were all proud to be a part of SunBanks Inc. The big, statewide banking company had an industry reputation for strong performance and employee loyalty.
Like all SunBanks officers, the five men read and signed a "code of conduct" every year. The code held them to a high standard: If there was any wrongdoing, they were to report it to the general auditor of SunTrust Banks Inc. in Atlanta, the corporate parent of SunBanks.
On March 26, 1992, something went wrong.
At a real estate auction, four pieces of property that the bank had acquired through foreclosure were _ to all outward appearances _ sold to bidders. The five bankers quickly concluded, however, that the auction had been rigged and that, to avoid a big loss, the bank's chief executive had kept control of all four properties.
Fearing a coverup, the five bankers tried to honor the code of conduct. They took their concerns to SunBanks' top executives in Orlando. Later, they went to state and federal regulators.
In the months that followed, the auction reverberated through the executive suites of SunBanks and the east Pasco business community.
Two state agencies conducted investigations.
The five bankers, their once-bright careers in jeopardy, were isolated and demoralized. They left SunBank of Pasco one by one.
Three of the bankers sued their former employer and eventually resolved the matter out of court in a large cash settlement.
The Pasco bank itself was disbanded, its branches transferred to the control of SunBank & Trust in Hernando County.
Even now, nearly two years after the auction, SunBanks executives are working to ensure that details of the auction and the lawsuit are kept under wraps. Last month, the bank asked a federal judge in Tampa to enforce an agreement that key documents and testimony in the matter remain confidential.
SunBanks declined requests by the Times for interviews with the executives most involved in the auction and its aftermath. The company also did not respond directly to written questions from the newspaper.
In a statement, however, the company said that all of its officers acted properly in the auction.
It said that the lawsuit brought by the three former bankers "essentially involved issues separate and apart from the auction."
And it said that the decision to consolidate SunBank of Pasco into another of the company's banks was unrelated to the auction and was part of a statewide strategy "to optimize the size of its banks."
"SunBank has no further comment because of pending proceedings and the desire to protect the privacy of current and former employees," the statement said.
A lot at stake
John C. Batsch didn't really want the job of chief executive officer at SunBank of Pasco. But he took it at the urging of Wendell Colson, president of SunBanks in Orlando and Batsch's mentor throughout his business career.
Batsch arrived at the Pasco bank in late 1990. Previously Batsch had served as the Lake County executive for SunBanks in Leesburg, where he and Colson first worked together.
In Zephyrhills, Batsch had a rocky start. A stocky man with graying brown hair and glasses, Batsch lacked the gentleman banker's style and soft touch the local business community had come to expect.
"He was not very friendly," recalled Linda Hauff of Hauff Realty in Zephyrhills, a prominent real estate firm.
Batsch and his bank had a lot at stake at the March 1992 auction.
Four properties that the Pasco bank had foreclosed on were offered "absolute" _ high bid wins, no matter how low the price. The properties appeared to sell. In fact, they did not.
Shortly after the auction, Batsch told his senior staff the bank had been "protected" and still owned the properties. What happened was "highly illegal," Batsch said, and should be kept quiet, according to several bankers at that meeting.
Batsch told his senior bankers that, without taking the losses from the four absolute sales, the bank could afford to pursue unexpected buyer interest at the auction in two other larger, harder-to-sell properties.
According to the bankers, Batsch also said that the bank might not be able to meet the profit goals it had promised SunBanks Inc. if it reported losses from the two big property sales and four absolute sales. And if the bank did not "make plan," SunBank of Pasco executives would not receive any bonuses.
Community real estate agents and others began to call the Pasco bank after the auction. They wanted to know who had purchased the four "absolute" properties.
None knew that the four properties were still owned by the bank.
A matter of conscience
With the auction an apparent sham, the five Pasco bankers working under Batsch wrestled with their consciences.
"If this got out in the community, it would be devastating to the bank's credibility and reputation as well as our own," Pierson said he told Moses after the auction.
The bankers wanted to do the right thing, to honor the "code of conduct," but feared for their jobs. As their difficulties grew over the next few months, Moses, Pierson, Rounds, Cumbee and Killory would dub themselves the "Pasco Five."
First, they consulted a lawyer for the bank, who told them they were obligated to report what they knew to SunTrust's general auditor. Instead, two weeks after the auction they called Jimmy O. Williams, Batsch's boss in Orlando. As a former CEO of the Pasco bank, Williams was someone the bankers thought they could trust.
Williams came to Zephyrhills the next day. He told them the bank would offer the four properties to the last legitimate bidders. But when Williams learned the five had spoken to a lawyer, he called his boss, Wendell Colson.
Colson, who went on to become chairman of SunBanks and this year's president of the Florida Bankers Association, flew into Zephyrhills that same afternoon. He and Williams met with the five bankers, who said Colson promised that SunBanks would investigate their allegations.
The hopes of the Pasco Five were short-lived.
In mid-April, less than a month after the auction, SunBanks told them its investigative committee had found nothing illegal or unethical. But it did find confusion over the auction _ confusion that it attributed to "poor communications" involving Batsch and the five bankers.
SunBanks then hired a consultant to help the Pasco bank build teamwork. The consultant also began documenting performance deficiencies of the five employees.
The Pasco Five began to feel abandoned. Killory soon left SunBank of Pasco for a job with another SunBank in Polk County. Fed up with SunBanks' lack of support, Moses, Pierson, Rounds and Killory voiced their concerns outside the company in an August 1992 letter to state and federal banking regulators.
"Based on my knowledge of the circumstances surrounding the auction," the four bankers wrote regulators, ". . . I do not believe that the bank's explanation is credible."
Pierson and Rounds soon left the bank and Moses followed. The three hired Tampa labor lawyer Charles Burr and in October 1992 sued SunBanks for harassing them as whistle-blowers, defaming them and invading their privacy.
In a "Dear SunBankers" memo to employees, the company called the suit "frivolous" and said the bankers were simply trying to enrich themselves. SunBanks countersued.
Cumbee didn't join the suit. But he resigned from SunBank in December 1992 and joined another area bank.
The state steps in
State banking investigator Ray Lemme was assigned to look into the SunBank auction after the state Division of Banking received the August 1992 letter from the Pasco bankers.
Lemme's preliminary report concluded real estate and auction laws may have been violated and noted "a referral to law enforcement authorities may be warranted." No referral appears to have been made.
The Lemme report was turned over to the state Department of Professional and Business Regulation, which has oversight of the auction industry.
In December, auctioneer Martin Higgenbotham was charged in an administrative complaint with bad faith and dishonesty in handling the four SunBank properties. Higgenbotham denies the charges, and the case is pending.
The lawsuit and countersuit involving SunBanks and the three former officers have been resolved. SunBanks quietly settled the suits with Pierson, Rounds and Moses last August.
Both parties agreed to keep the terms of the deal confidential. But the settlement appears to have included a large cash settlement to the three former employees.
Since that settlement, Pierson has bought a four-door Lexus with leather interior for cash. He works for a community bank in Sumter County.
Rounds, an executive at MacDill Federal Credit Union in Tampa, has purchased a Mazda 929 for cash and a $173,000 home in Valrico.
And Moses, whose wife is a Pasco County schoolteacher, gave up banking and is a full-time student at the Stetson University College of Law.
John Batsch, the man the Pasco Five accused of orchestrating the coverup after the auction, is no longer in east Pasco.
When SunBank of Pasco was disbanded last year, SunBanks Inc. announced that he had been reassigned to company headquarters in Orlando without a specific job. He is now a senior vice president in the credit department at SunBank of Ocala.
Editor's note: Some of the documentation and testimony in the SunBanks case have been sealed, and both sides in the lawsuit are bound by a confidentiality agreement. This story is based on public records generated by the two state investigations and the lawsuit, on an Oct. 15, 1992 memo from SunBanks Inc. to employees and on extensive interviews.
SunBanks Inc.'s statement
The executives at SunBanks Inc. involved in this story declined to be interviewed. They also did not respond directly to a series of written questions. Instead, the Orlando banking company issued this statement:
SunBank strongly disagrees with the press linkage of the March 1992 Higgenbotham auction in Tampa, a lawsuit by three former SunBank of Pasco County officers and the consolidation of SunBank of Pasco County and SunBank & Trust Co. based in Hernando County. The three are distinct and separate events.
Questions have arisen concerning the sale of certain SunBank of Pasco County properties by Higgenbotham Auctioneers International Ltd. Inc. SunBank's position is that its officials acted properly. The preliminary report of the Department of Banking and Finance did not find any violations of banking law. Additionally, the Department of Business & Professional Regulation conducted its own investigation and, as a result, initiated administrative proceedings against the auctioneer for his actions during the auction. SunBank continues to assist the DBPR in these proceedings and, therefore, further comment regarding the auction would be inappropriate.
The disputes between the former Pasco officers and SunBank resulted in both a lawsuit and countersuit which essentially involved employer/employee issues separate and apart from the auction. At a court-recommended mediation to resolve both claims and counterclaims, a settlement was reached. As is standard practice, the terms of the settlement agreement are confidential.
In January 1994, SunBank consolidated its two banks in Pasco, Hernando and Citrus counties. This was part of an ongoing strategy to optimize the size of its banks. This combination was one of five such bank combinations completed during the past two years. In fact, the SunBanks in Collier and Lee counties were consolidated this past weekend to form SunBank/Southwest Florida.
SunBank chose as CEO James H. Kimbrough, a fifth-generation Hernando Countian, to lead the newly consolidated $1.2-billion SunBank & Trust Co. Kimbrough has over 25 years of outstanding banking experience in the Pasco, Hernando and Citrus markets. John Batsch was redeployed to fill a vacant executive position at SunBank of Ocala, a $500-million bank.
SunBank has no further comment because of pending proceedings and the desire to protect the privacy of current and former employees.
How it happened
At an auction in Tampa in 1992, attending bidders were told four foreclosed properties held by SunBank of Pasco County would be sold "absolute" _ meaning the highest bidder would win, no matter what the price. Bids were made but no winners appeared, prompting some of the bank's own officers to allege a coverup. What happened?
SunBanks Inc. hires Higgenbotham Auctioneers of Lakeland to unload dozens of foreclosed properties held by its banks in Florida. The statewide auctions, conducted over two weeks, do poorly. Many properties sell for far less than expected, leaving the banks with heavy losses.
When the auction reaches Tampa on March 26, 1992, four SunBank of Pasco properties promoted as "absolute" appear to sell. But they do not.
SunBank of Pasco chief John Batsch pulls his managers aside after the auction. He tells them the bank is "protected" from taking serious losses on the properties, that what happened was "highly illegal" and that they should "play dumb" if people ask questions, according to written statements by several bank officers.
The Pasco Five
To avoid participating in what may be a coverup, five SunBank of Pasco officers seek advice from the bank's outside counsel. The bankers, who later become known as the "Pasco Five," are told they are bound by the bank's own "code of conduct" to report their concerns to the general auditor of SunTrust Banks Inc., the Atlanta-based parent of SunBanks Inc. If the bankers don't act, the lawyer says, he will.
The bankers telephone Batsch's boss, SunBanks executive vice president Jimmy O. Williams in Orlando, and explain their concerns. Williams and his boss, SunBanks president Wendell Colson, travel to Zephyrhills and promise an internal investigation.
Later, SunBanks tells the Pasco Five it found nothing illegal or unethical and blames the incident on "poor communication." SunBanks hires a consultant to conduct psychological evaluations of the bankers to encourage "team building."
After reporting their concerns to state and federal banking regulators, three of the Pasco Five _ Dennis Moses, Tim Pierson and Bayne Rounds _ file suit against SunBanks and Batsch charging that as whistle-blowers they faced harassment from bank management.
SunBanks denies the charges. In a memo to SunBank employees, the bank says: "it is not in the best interest ... to agree to pay a large sum of money to resolve frivolous charges."
The state investigation
A preliminary investigation by the state Division of Banking finds that state auction and real estate laws may have been violated and recommends further inquiry.
"In addition, a referral to law enforcement authorities may be warranted at this point," the report concludes. Apparently, no referral is ever made.
Rather than go to trial, SunBank agrees to resolve the lawsuit filed by Moses, Pierson and Rounds by making a large cash settlement. SunBanks requires them to sign an agreement to keep details of the settlement confidential.
The bank's end
SunBanks announces it will disband SunBank of Pasco as part of a consolidation plan. The bank becomes part of the branch network of neighboring Sun Bank & Trust in Brooksville. Batsch, the Pasco CEO, is recalled to Orlando and later assigned to SunBank of Ocala as a senior vice president.
The confidential files
Jan. 27, 1994
SunBanks asks a federal judge in Tampa to make sure that certain documents in the state's investigation remain confidential. A decision is pending.
Disclosure of such information could hurt the merger of SunBank of Pasco into Sun Bank & Trust and affect future litigation, SunBanks says. "This, in turn, could impair the safety and soundness of the financial institution," it says.