A lawsuit filed Friday accuses Sterling Financial Corp. and two officers of concealing the Spokane company’s vulnerability to the downturn in residential and real estate markets, which when disclosed a year ago devastated the price of its stock.
Shares tumbled 47 percent Jan. 14, the day after Sterling reported more than $500 million in operating losses and accounting charges, and the suspension of its quarterly dividend.
The filing of the complaint in U.S. District Court on behalf of the City of Roseville (Calif.) Employees’ Retirement System says Sterling, then-Chairman Harold Gilkey, and Executive Vice President Dan Byrne misrepresented the quality of the company’s loan portfolio from July 22, 2008, until January and the success of their efforts to get ahead of the sinking fortunes of developers stuck with unsold homes and lots.
From a peak price of $14.72 in October 2008, shares fell to $3.40 on Jan. 14.
The suit filed by the Seattle law firm of Lovell Mitchell & Barth LLP asks the court for damages to anyone who purchased Sterling stock during the six months when the company’s condition was allegedly misrepresented.
Spokeswoman Cara Coon said Sterling believes the complaint has no merits, and that the company will defend itself vigorously.
Since its filing, five other law firms have issued press releases soliciting shareholders who might have claims against Sterling larger than that of the Roseville employees. The entity or individual with the biggest losses may be designated the lead plaintiff, with the right to select the attorneys.
Sterling shares have traded at less than $1 per share – closing at 62 cents Tuesday – for more than 30 days, which triggered a warning from NASDAQ that the stock could be delisted if prices do not recover within 180 days.
Coon, noting Sterling is in a “quiet period” prior to the release of earnings that limits the comments the company can make on its stock, said officials are working on remedial measures.