Sterling Financial Corp. is suing the former CEO of a bank it acquired last spring, accusing the man of securities fraud and violating a non-competitive agreement.
Spokane-based Sterling claims that Clyde Conklin, the former president, chief executive and director of FirstBank NW Corp., violated a non-compete clause with FirstBank when he took a job at the Bank of Whitman and enticed employees and $4 million in commercial accounts away from the newly merged bank.
Documents also allege that Conklin committed securities fraud by misrepresenting initial information that played a role in determining whether Sterling would acquire the 21-branch corporation.
The lawsuit, filed in U.S. District Court for Eastern Washington last week, names both Conklin and the Bank of Whitman, as defendants. FirstBank NW Corp is based in Clarkston, Wash.
When contacted at his Clarkston home, Conklin declined to comment. Representatives of Sterling and Bank of Whitman also declined to discuss the pending case.
According to the lawsuit, FirstBank representatives hired a law firm to approach Sterling about a possible merger that would be more beneficial to stockholders than an offer from Crescent Capital VI, LLC.
During a meeting that helped determine whether Sterling would acquire FirstBank, the suit claims that Conklin misrepresented his employment intentions.
Documents allege that Conklin, who was at the time the FirstBank CEO, told Sterling Savings Bank Chairman and CEO William Zuppe that instead of staying on after the merger, he planned to take two or three years off from banking because he was burnt out.
Sterling Financial Corp. paid about $169.6 million in a combination of common stock and cash for FirstBank NW Corp. in a deal closed on Nov. 30, 2006. At the time Conklin owned 163,109 shares of FirstBank stock, the lawsuit said.
A day after the merger was finalized, benefiting stockholders that included Conklin, the suit says the former CEO went to work for the competing Bank of Whitman — failing to give Sterling any notice of his change of plans. Taking the job violated a non-compete clause with FirstBank, which had become the property of Sterling, the suit says.
Sterling further claims that FirstBank’s former chief operating officer, Terry Otte, had his assistant, Jodi Holthaus, print out a report detailing confidential FirstBank account information about outstanding commercial loans. Otte left FirstBank the day the merger with Sterling was finalized and went to work at Bank of Whitman a day later, documents claim. Otte’s assistant, Holthaus, later went to work for the Bank of Whitman.
Conklin immediately started soliciting accounts away from the newly merged bank, the lawsuit contends. As of the date of the filing, customers with loans of over $4 million had left Sterling Savings Bank for the Bank of Whitman.
Sterling is requesting damages relating to allegations of securities fraud, breach of contract, breach of fiduciary duty, breach of confidentiality, tortuous interference with contracts and business relationships and requests a trial by jury.