Victory in Shareholder Derivative Suit in West Virginia
In a remarkable victory, Zuckerman Spaeder attorneys settled claims against the officers, directors, and accountants of Belmont National Bank for more than $10 million. Partners Carl S. Kravitz and Cy Smith and associates Kristen Flynn and Cindy Tippett represented a shareholder of the Bank, located in Wheeling, West Virginia, who sued the defendants after Belmont lost well over $20 million making loans to a mobile home dealer and his customers. The loan scheme collapsed amid evidence of fraud by the dealer, who is now in bankruptcy.
Zuckerman Spaeder established that the defendants had ignored a series of red flags suggesting that the loans were unlikely to be paid, or were even fraudulent. After settling the claims against the Bank's internal and external auditors for $4 million, the firm established that the directors were equally culpable. On the eve of trial, the directors and their insurance carrier agreed to pay more than $6 million more for the benefit of the Bank and its shareholders.
The case illustrated the firm's core competency in high-stakes, complex civil litigation, particularly in banking litigation, accountant and director liability, corporate governance, and shareholder derivative suits. The result was extraordinary, because the recovery represented such a high percentage of the Bank's losses — especially rare in a case with losses measured in the tens of millions of dollars.