Firm run by Certus founders told to give documents to state AG
07/09/2014 12:00 AM
07/08/2014 8:07 PM
A Circuit Court judge has ordered a privately held company that provided management services for CertusBank to turn over documents and other records to the South Carolina Attorney General’s Office, which is investigating alleged fraud, court records show.
The Securities Division of Attorney General Alan Wilson’s office is seeking documents from Charlotte-based Integrated Capital Strategies, whose managers founded CertusBank, according to Court of Common Pleas filings in Richland County.
In asking that ICS be required to comply with the subpoena, Ian Weschler, an assistant attorney general, said investigators were probing alleged fraud “and other violations” concerning the offer and sale of securities in and from South Carolina, court records show.
An attorney for ICS, in objecting to the subpoena, said in a letter to Wilson’s office that the attorney general, as the state’s securities commissioner, lacked jurisdiction over ICS and had no authority to investigate the issuance of stock or to investigate Certus’ banking practices.
The attorney, Jim Griffin of Columbia, said in a court filing ICS was organized under Delaware law and its principal place of business is North Carolina, not South Carolina. The company has never offered for sale or sold securities in South Carolina, Griffin said.
He also said the Office of the Comptroller of the Currency has notified ICS that federal officials want to inspect documents.
“An additional effort by the South Carolina Attorney General is duplicative, unlawful and unduly burdensome,” Griffin said in his letter, contained in court filings.
Judge G. Thomas Cooper Jr. ruled, however, the state subpoena is valid and ICS must comply.
The OCC is an independent bureau of the U.S. Department of the Treasury that supervises national banks and federal savings associations.
Mark Powell, a spokesman for the Attorney General’s Office, declined to comment on the state’s investigation. An OCC spokesman also declined comment.
Griffin said Tuesday that ICS officials were evaluating the judge’s order.
The officials could ask the judge to reconsider, appeal the decision or comply, Griffin said.
“We haven’t decided which avenue we’re going to take yet,” he said.
CertusBank officials couldn’t be reached.
The state subpoena seeks documents identifying employees, independent contractors and interns as well as compensation paid to Walter Davis, Angela Webb and Charles Williams, former CertusBank executives.
Further, the subpoena seeks copies of contracts related to ICS’ dealings with CertusBank, CertusHoldings and Blue Ridge Holdings, court records show. The subpoena also wants documents identifying the company’s investors.
Greenville-based CertusBank is a wholly owned subsidiary of CertusHoldings, formerly Blue Ridge Holdings, court records show.
ICS was owned by members of CertusHoldings’ senior management team, including Milton Jones Jr., Davis and Webb, according to attorneys and court filings.
ICS attorneys said in court filings the company’s founders didn’t initially come together to start a bank. Instead, their initial vision was to form an asset management group to purchase distressed properties from the portfolios of struggling financial institutions and return the properties to profitability, then sell them for a gain, the attorneys said.
A potential equity investor first suggested the ICS founders seek financial backing to start their own bank, the attorneys said.
In December 2009, CertusHoldings applied with the OCC for a shelf charter to operate a new bank. Within six months, CertusHoldings received commitments for up to $500 million of equity investment from a small group of investors, the attorneys said.
Those investors aren’t South Carolina residents, the attorneys said. The investors were each restricted in the level of their investment, with no single investor permitted to contribute more than 9.9 percent of the voting shares, the attorneys said.
The investors also were restricted in that they were prohibited from “acting in concert” with one another to influence the bank’s operation, the attorneys said.
On Jan. 21, 2011, CertusBank acquired CommunitySouth Bank & Trust, a failed South Carolina bank, through an auction by the Federal Deposit Insurance Corp.
Earlier this year, Jones, Davis and Webb sued CertusBank, an investor and a firm managed or controlled by the investor.
The former executives allege in the federal lawsuit that 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.
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.
CertusBank officials said Charles Williams resigned as vice chairman of the company in April in a long-planned move. He isn’t part of the suit against the bank.
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