Lawsuits: Florida Bank Group insiders fleeced minority shareholders

Susan Martinez, former CEO, and president, Florida Bank, Tampa, is accused in two lawsuits along with other bank insiders of diluting minority shareholders and enriching themselves in the lead-up to the bank's sale to Louisiana-based IberiaBank. [Times file photo]
Susan Martinez, former CEO, and president, Florida Bank, Tampa, is accused in two lawsuits along with other bank insiders of diluting minority shareholders and enriching themselves in the lead-up to the bank's sale to Louisiana-based IberiaBank. [Times file photo]
Published March 1, 2017

TAMPA — The Florida Bank Group was hemorrhaging cash in the years leading up to its decision in 2013 to raise capital through a private stock offering.

From 2007 to 2013, the Tampa bank had lost $137 million while receiving $20 million from a government financial rescue fund in 2009.

Minority shareholders in the bank said they "were provided no reason to believe that additional investment would yield better results than prior investments ... (and) could not conceive of chasing good money after bad."

In fact, those minority shareholders said they later learned that the offering was actually the first part of a plan by former Florida Bank Group "insider officers and directors" to dilute their shares in the bank from $7 million to just $100,000 while enriching themselves, according to two lawsuits filed against the insiders and IberiaBank.

Louisiana-based IberiaBank purchased Florida Bank Group in a $90-million deal finalized in 2015.

Among 23 shareholders who filed suit in Hillsborough County circuit court are former Tampa Bay Rays manager Lou Piniella and his wife Anita and prominent Tampa Bay attorneys James Wilkes, Timothy McHugh and Benny Lazzara Jr.

The suits name 12 former Florida Bank insiders, including Susan Martinez, the bank's former president and CEO, and Robert Rothman, its chairman. Martinez declined comment on the litigation when reached on Tuesday, and Rothman could not be reached.

The result of the maneuvers by Florida Bank insiders was a 121 percent return on their own investment, the lawsuits said.

"The defendants had captured these spoils and set themselves up for an eventual payday upon the sale of the bank," one of the lawsuits said. "The minority shareholders… were left with a worthless investment."

The legal spat comes as Iberia continues to enlarge its footprint in Florida. On Tuesday, Iberia announced a deal to buy Miami-based Sabadell United Bank for about $1 billion in cash and stock, adding $5.8 billion in assets into its fold. Sabadell is a subsidiary of Banco de Sabadell, which is based in Barcelona, Spain.

Sabadell has one office in Tampa Bay.

The lawsuits portrayed a community bank struggling with massive losses that peaked at $54 million in 2010 during a stretch of seven consecutive money-losing years. The bank, news reports indicated, would have $150 million in troubled loans on its books by 2014.

The 2013 private offering was extended to all bank shareholders on a pro rata basis based on their total stock ownership at the time, the suits said. But the suits indicated the minority shareholders turned their back on the offer given the bank's finances.

"No plan to position Florida Bank Group for sale was disclosed," one of the lawsuits said.

But despite Florida Bank's losses, "the insider officers and director defendants gorged themselves on this offering," the lawsuit said.

The offering had been made, the suits said, without the right to convert the units to shares of the bank's common stock.

But later in 2013, the suits said, the defendants executed a series of steps that led to the massive dilution of the minority shareholder's stake in the bank. The insiders conducted a 100-to-1 reverse stock split, the lawsuits said. That meant someone with 100 shares of stock would have just a single share, though presumably the share would be more valuable.

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But then, the private offering was converted to 2.48 million shares of common stock, the suits said. Those share were not diluted because that conversion came after the stock split, the suits said.

This required the amendment of the bank's articles of incorporation, which was done without a vote of all stockholders, the suits said.

None of these steps were disclosed to all shareholders, the suits said.

In June, IberiaBank expressed interest in a purchase of Florida Bank. On June 26, Martinez and the Gary Ward, the bank's chief financial officer, met with IberiaBank's president. IberiaBank officials could not be reached to comment on Tuesday because of the Mardi Gras holiday in Louisiana.

On June 30, the lawsuits said, the defendants without any notice to the minority shareholders amended their 2013 incentive plan making directors eligible for up to 40,000 additional shares of common stock.

IberiaBank signed a letter of intent with Florida Bank on July 29, 2014 for a $110 million acquisition that for the first time revealed that Martinez "had been offered a secret employment agreement as part of the sale she had been secretly negotiating," one of the lawsuits said.

Less than a month later, the lawsuit said, the sales price was reduced by up to $30 million "without explanation." The sales price fluctuated before settling at about $90 million in stock and cash.

"Defendants realized millions of dollars in profits, while plaintiffs and other non-insider shareholders incurred significant losses," the suit said.

Contact William R. Levesque at Follow @Times_Levesque.