2 National City shareholders file lawsuits over sale
Days after getting merger news about National City Corp., shareholders sued the bank in Pittsburgh and Delaware courts over its $5.6 billion deal with PNC Financial Services Group.
A lawsuit filed in federal court in Pittsburgh by shareholder Martin Sheerer on Monday accuses the Cleveland bank of fraud by misrepresenting its condition in the months prior to the deal with PNC last Friday. National City statements and omissions "induced" Sheerer and "thousands of unsuspecting shareholders" to buy or hold their stock, then were hurt by the stock's continued decline.
The lawsuit seeks damages it wants the court to determine at trial. It also seeks designation as a class action of shareholders who, such as Sheerer, bought the stock since May 1.
Sheerer claims National City misstated the adequacy of its loan-loss reserves, and failed to disclose the bank's exclusion from a government program to bolster capital and its key regulator's order that National City find a buyer instead.
A National City spokesman could not be reached for comment.
PNC will pay National City holders $2.23 a share in a deal expected to close by yearend. PNC is being assisted by selling $7.7 billion in preferred shares to the U.S. Treasury as part of the agency's bank recapitalization plan.
Another shareholder sued National City in federal court in Wilmington, Del., alleging it breached its fiduciary duty by failing to obtain a better deal. PNC's offer is "unfair and grossly inadequate," said the lawsuit. It also accuses CEO Peter Raskind of "self-dealing," and objects to golden parachutes totaling over $41 million for the banks top three executives.
PNC spokesman Brian Goerke declined to comment.
Meantime, U.S. Rep Steven LaTourette, a Republican in suburban Cleveland, asked the Treasury Department and a House committee to investigate the deal. He said John Dugan, comptroller of the currency, steered the $7.7 billion to PNC, noting that Dugan earlier served at a Washington law firm which represented PNC in 2005.
Comptroller spokesman Robert Garrson said Dugan also once represented National City. "I don''t know why anybody would suggest he'd favor one over the other," Garrson said.