Subpoenas issued in Certus Bank investigation

Greenville NewsMay 16, 2014 

Certus Bank

State investigators have issued subpoenas amid allegations of mismanagement and executive abuses at Greenville-based CertusBank.

Eric Bland, a Columbia attorney representing three former bank executives, told The Greenville News the Securities Division of the state Attorney General’s Office issued the subpoenas, but Bland wouldn’t identify who received them.

He said “individuals and some entities” received administrative subpoenas from the Securities Division, which enforces state securities laws, and they are being fought on the grounds the Attorney General’s Office doesn’t have jurisdiction over banks and out-of-state private companies that don’t issue securities.

Mark Powell, a spokesman for Attorney General Alan Wilson, said he wouldn’t comment “on any potential or possible investigation.”

Bank spokesperson Kelly Owens said in a statement Thursday that CertusBank “is not aware of any teammates being subpoenaed regarding this investigation.”

The Securities Division enforces the South Carolina Uniform Securities Act, which seeks to protect South Carolina investors against fraud and unfair or unethical practices.

Bland represents the three former executives who sued CertusBank, an investor and a firm managed or controlled by the investor. The former executives allege they were unjustly fired and defamed as part of a conspiracy to spread false information amid allegations of mismanagement and executive abuses, according to court records.

Milton Jones Jr., Walter Davis and Angela Webb allege in the suit they were given 15 minutes to decide whether to resign their bank positions or be fired.

They also allege someone released confidential bank and financial information about CertusBank customers that was used in an effort to defame the executives and cause them to be terminated, according to court records.

CertusBank, New York resident Benjamin Weinger and 3-Sigma Value Financial Opportunities, a Delaware limited partnership managed or controlled by Weinger, are named as defendants, according to filings in the Greenville Division of U.S. District Court.

Weinger is a 4.9 percent equity investor in CertusBank, according to court records.

As of Thursday, none of the defendants had filed responses to the suit in court.

Billy Wilkins, a Greenville attorney representing Weinger and 3 Sigma, declined to comment.

In their suit, the former executives said Weinger and 3-Sigma “curiously came in possession of highly confidential inside bank information and documents, including income tax returns and audited financial statements” of Integrated Capital Strategies.

ICS, a privately held company, was owned by members of CertusHoldings’ senior management team, including Jones, Davis and Webb, according to Bland and court filings.

In reviewing CertusBank’s non-interest expenses, Weinger said in a Jan. 6 letter to company stakeholders that $3.4 million paid to ICS was included in $11.6 million in fees paid to outside consultants in 2012.

The former executives allege in the lawsuit Weinger and 3-Sigma wanted to change the bank's management and board composition to position CertusBank as an acquisition target "because they did not receive a rapid return on their hedge fund investment."

As part of CertusBank’s annual budget, board members approved construction and upfit for the main office in Greenville, the former executives said in their suit. They also said the board gave the executives authority to spend up to $2 million “per occurrence.”

Money was spent on PGA tour events and for political events with the board’s knowledge, according to the suit.

Last month, CertusBank said it terminated the three top executives and appointed John Poelker, an industry veteran, interim president and CEO.

The $1.6 billion-asset bank said Jones, Davis and Webb were terminated from their respective posts as executive chairman, chief executive officer and president.

On March 29, The News reported bank officials were looking into issues raised in a story by trade publication American Banker that cited sources alleging “gross mismanagement by senior executives.”

In the article published March 28, American Banker reported some investors questioned expenses by CertusBank.

Federal court records show Weinger, portfolio manager of 3-Sigma Value Financial Opportunities LP in New York, raised questions in Jan. 6 and March 5 letters to CertusHoldings stakeholders about the bank’s “elevated” non-interest expenses, use of consultants, private flying, travel and entertainment expenses and other costs.

The letters were included as exhibits in the former executives’ suit against CertusBank, a subsidiary of CertusHoldings.

CertusBank said recently it reorganized top management to speed decision-making, encourage teamwork and become more nimble under Poelker.

As part of the restructuring, several executive-level positions were consolidated, reassigned or eliminated, Certus officials said.

Certus lost $9 million in the first quarter ended March 31, continuing its string of financial losses, according to a report filed with bank regulators.

CertusBank lost a combined $84.1 million in 2012 and 2013, according to Federal Deposit Insurance Corp. records.

Staff writer

State investigators have issued subpoenas amid allegations of mismanagement and executive abuses at Greenville-based CertusBank.

Eric Bland, a Columbia attorney representing three former bank executives, told The Greenville News the Securities Division of the state Attorney General’s Office issued the subpoenas, but Bland wouldn’t identify who received them.

He said “individuals and some entities” received administrative subpoenas from the Securities Division, which enforces state securities laws, and they are being fought on the grounds the Attorney General’s Office doesn’t have jurisdiction over banks and out-of-state private companies that don’t issue securities.

Mark Powell, a spokesman for Attorney General Alan Wilson, said he wouldn’t comment “on any potential or possible investigation.”

Bank spokesperson Kelly Owens said in a statement Thursday that CertusBank “is not aware of any teammates being subpoenaed regarding this investigation.”

The Securities Division enforces the South Carolina Uniform Securities Act, which seeks to protect South Carolina investors against fraud and unfair or unethical practices.

Bland represents the three former executives who sued CertusBank, an investor and a firm managed or controlled by the investor. The former executives allege they were unjustly fired and defamed as part of a conspiracy to spread false information amid allegations of mismanagement and executive abuses, according to court records.

Milton Jones Jr., Walter Davis and Angela Webb allege in the suit they were given 15 minutes to decide whether to resign their bank positions or be fired.

They also allege someone released confidential bank and financial information about CertusBank customers that was used in an effort to defame the executives and cause them to be terminated, according to court records.

CertusBank, New York resident Benjamin Weinger and 3-Sigma Value Financial Opportunities, a Delaware limited partnership managed or controlled by Weinger, are named as defendants, according to filings in the Greenville Division of U.S. District Court.

Weinger is a 4.9 percent equity investor in CertusBank, according to court records.

As of Thursday, none of the defendants had filed responses to the suit in court.

Billy Wilkins, a Greenville attorney representing Weinger and 3 Sigma, declined to comment.

In their suit, the former executives said Weinger and 3-Sigma “curiously came in possession of highly confidential inside bank information and documents, including income tax returns and audited financial statements” of Integrated Capital Strategies.

ICS, a privately held company, was owned by members of CertusHoldings’ senior management team, including Jones, Davis and Webb, according to Bland and court filings.

In reviewing CertusBank’s non-interest expenses, Weinger said in a Jan. 6 letter to company stakeholders that $3.4 million paid to ICS was included in $11.6 million in fees paid to outside consultants in 2012.

The former executives allege in the lawsuit Weinger and 3-Sigma wanted to change the bank's management and board composition to position CertusBank as an acquisition target "because they did not receive a rapid return on their hedge fund investment."

As part of CertusBank’s annual budget, board members approved construction and upfit for the main office in Greenville, the former executives said in their suit. They also said the board gave the executives authority to spend up to $2 million “per occurrence.”

Money was spent on PGA tour events and for political events with the board’s knowledge, according to the suit.

Last month, CertusBank said it terminated the three top executives and appointed John Poelker, an industry veteran, interim president and CEO.

The $1.6 billion-asset bank said Jones, Davis and Webb were terminated from their respective posts as executive chairman, chief executive officer and president.

On March 29, The News reported bank officials were looking into issues raised in a story by trade publication American Banker that cited sources alleging “gross mismanagement by senior executives.”

In the article published March 28, American Banker reported some investors questioned expenses by CertusBank.

Federal court records show Weinger, portfolio manager of 3-Sigma Value Financial Opportunities LP in New York, raised questions in Jan. 6 and March 5 letters to CertusHoldings stakeholders about the bank’s “elevated” non-interest expenses, use of consultants, private flying, travel and entertainment expenses and other costs.

The letters were included as exhibits in the former executives’ suit against CertusBank, a subsidiary of CertusHoldings.

CertusBank said recently it reorganized top management to speed decision-making, encourage teamwork and become more nimble under Poelker.

As part of the restructuring, several executive-level positions were consolidated, reassigned or eliminated, Certus officials said.

Certus lost $9 million in the first quarter ended March 31, continuing its string of financial losses, according to a report filed with bank regulators.

CertusBank lost a combined $84.1 million in 2012 and 2013, according to Federal Deposit Insurance Corp. records.

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