Gold Banc To Settle Lawsuit For $16MAug 10, 2004 | Sarasota Herald-Tribune Gold Banc Corp. has reached an agreement to settle a once-secret lawsuit for $16 million, but the pending sale of the company is still in question.
The Leawood, Kan.-based company, with nine Gold Bank branches in Manatee, Sarasota and Charlotte counties, said Monday the settlement will cost it more than $10 million after insurance coverage and a tax benefit.
But after restating its second-quarter earnings to reflect that cost, Gold said it may not hold the total equity stipulated for its sale.
Silver Acquisition Corp., a private investor group, also has told the bank that it wants to adjust the proposed purchase price of $672 million, or $16.60 per share.
Company President Mick Aslin said the lawsuit settlement "removes one of the uncertainties" for the sale, but the price and equity issues are unresolved.
"We recognize that one aspect of these discussions will be the possibility that the condition that we have at least $277 million in total equity at closing may not be satisfied," Aslin said.
The lawsuit was filed in October 2002 by an Oklahoma farmer who claimed Gold charged him excessive interest rates and fees on an agricultural loan.
The suit was sealed, and the bank didn't learn about it until June.
These "qui tam" lawsuits are filed on behalf of governmental agencies by whistleblowers who share in any damages and penalties.
The oral agreement to settle the suit for $16 million must still be approved by the U.S. Attorney General.
Gold's insurance will pay $2 million, and a tax benefit of $3.85 million for its deductible portion puts the charge to its earnings at $10.15 million, or 26 cents per share.
Legal fees to farmer Roger L. Ediger could be added later.
Gold has now slashed its second-quarter earnings to $309,000, or 1 cent per share, from the previously announced $10.46 million, or 27 cents per share.
In a filing with regulators, Gold noted that it could have been held liable for up to $30 million in damages, plus as much as $9 million in penalties, from the lawsuit.
The lawsuit claimed that Gold's banks in Kansas and Oklahoma charged higher rates and fees on loans subsidized through the federal Farm Service Agency.
The bank said it made 825 such loans and was paid $10 million on them from October 1996 through June. Many of the loans were made by banks before Gold acquired them, the company said.