Judge Consolidates Suits Over Colonial TARP Funding

Judge Consolidates Suits Over Colonial TARP Funding - 3/9/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

SETTLEMENT NEWS:

Judge Consolidates Suits Over Colonial TARP Funding
Shannon Henson

Securities Law 360. March 9, 2009
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EXCERPT: A federal judge has consolidated four securities class actions alleging that Colonial BancGroup Inc. and its leaders made misleading statements about its participation in the Troubled Assets Relief Program. In an order Friday, Judge Myron H. Thompson of the U.S. District Court for the Middle District of Alabama consolidated the four cases, following a request made by the bank earlier in March. The suits also name CEO and President Robert E. Lowder, Chief Financial Officer Sarah H. Moore and Chief Accounting Officer T. Brent Hicks. The suit that Judge Thompson deemed to be the lead case alleges that Colonial did not immediately tell the public that it needed to raise additional outside capital of $300 million to tap $500 million in TARP funding. The funding requirement was not disclosed until after the market closed on Jan. 27, the suit said. Before then, the proposed class members relied on the information that the TARP financing had been preliminarily approved when acquiring their shares. On Dec. 2, Colonial's share price increased from $2 a share to $3.08 a share after the company announced it would get TARP financing. But after the announcement about the additional funding requirement, Colonial's stock dropped from $1.59 to $0.85 a share. “Public statements on Dec. 2, 2008, were a gross, deliberate and intentional misrepresentation of the actual situation regarding Colonial's receipt of TARP funding from Treasury and the FDIC,” said the suit, filed by shareholders Earl and Patricia Dees. Alabama-based Colonial, the suit said, is under significant stress especially given that its outstanding loan portfolio contains a good number of loans from the Florida and Nevada real estate markets.

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