According to a press release dated March 29, 2011, the Complaint charges WIBC and certain of the Company's current and former executive officers with violations of federal securities laws. WIBC is the holding company of Wilshire State Bank, a California state-chartered bank that operates 24 branch offices in California, Texas, New Jersey and New York, and six loan production offices in Dallas, Houston, Atlanta, Denver, Annandale, Virginia, and Fort Lee, New Jersey, and is an SBA preferred lender nationwide.
The Complaint alleges that throughout the Class Period defendants knew or recklessly disregarded that their public statements concerning WIBC's business, operations and prospects were materially false and misleading. Specifically, the defendants made false and/or misleading statements and/or failed to disclose: (1) that the Company had deficiencies in its underwriting, origination, and renewal processes and procedures; (2) that the Company was not adhering to its underwriting policies; (3) that the Company lacked adequate internal and financial controls; and (4) that, as a result of the above, the Company's statements were materially false and misleading at all relevant times.
On March 16, 2011, WIBC disclosed that the Company had conducted an internal investigation with assistance of outside independent professional firms and the Company's internal audit department and discovered a significant deficiency in the operating effectiveness of loan underwriting, approval and renewal processes for those loan originations and asset sales associated with a former loan officer. Further, the Company disclosed that these processes lacked effective supervision and oversight and that the Company's operating efficiencies were hindered by the former chief executive officer and other management personnel.
As a result of this news, shares of WIBC declined $0.54 per share, more than 9%, to close on March 17, 2011, at $5.27 per share, on unusually heavy volume. The following day, WIBC shares further declined another $0.42, or 7.97%, to close on March 18, 2011, at $4.85.
On May 24, 2011, the plaintiff filed an Amended Complaint. On July 1, 2011, Judge Valerie Baker Fairbank granted the motion of Locals 302 and 612 of the International Union of Operating Engineers-Employers Construction Industry Retirement Trust for Appointment as Lead Plaintiff and Approval of Lead Counsel. On August 30, 2011, a Second Amended Class Action Complaint was filed. The defendants responded by filing several motions to dismiss the complaint on October 31, 2011.
On February 8, 2012, the Court issued an Order granting defendants' motions to dismiss with leave to amend. Plaintiffs were given 21 days to to file and serve a Third Amended Complaint. On March 5, 2012, the Court issued an Order dismissing this action without leave to amend.