By Patsy R. Brumfield/NEMS Daily Journal
TUPELO – BancorpSouth Inc. has settled one lawsuit but faces another claiming the Tupelo-based financial holding company lured investors during tough economic times with false financial information.
Terms of the settlement, funded by the bank’s insurance carriers and announced Friday, were not disclosed.
In its announcement, BancorpSouth said the settlement is subject to execution of a “definitive” agreement and approval in the U.S. District Court of Middle Tennessee, where the lawsuit was filed in 2010.
BancorpSouth denies the lawsuit’s accusations of wrongdoing. “The settlement allows both sides to avoid the potential risks and costs of lengthy litigation,” the announcement stated. Edward B. Winslow, a BancorpSouth investor, filed the class-action lawsuit claiming that the bank, in the face of difficult economic times in 2009, lured investors by claiming to have a strong loan portfolio that was more resistant to the difficulties plaguing other banks and financial institutions.
According to his lawsuit, Winslow said BancorpSouth attributed its superior financial performance to various factors, which he insisted were overstated.
The bank announced its financial results for the fourth quarter and fiscal year 2009 on Jan. 21, 2010, reporting profits for both periods.
Questions arose about the financial reports, and a month later the bank told investors it would review the statements. With that news, the stock dropped $3.10 per share.
In March 2010, the bank issued a revised report, which included increased losses and a $21.6 million reduction in net income.
Other stock declines occurred during this period. It is this stock price drop which was at the core of this lawsuit.
In its defense, BancorpSouth disagreed with Winslow’s analysis and noted that by the filing of its revised report March 15, 2010, its share price actually went up over the next few weeks.
A Lee County lawsuit filed by William Burgess on Aug. 6, 2011, makes similar claims. That lawsuit was halted in December 2011 while the Tennessee case proceeded.
Burgess’ attorney, David McMullan Jr. of the Barrett Law Group in Lexington, could not be reached for comment. Neither could attorneys for Winslow.
In denying the bank’s motion to dismiss the lawsuit, U.S. Magistrate Judge John S. Bryant wrote on April 26, 2011, that a key issue pressed by Winslow’s lawsuit was his allegation that the bank’s losses and overstated earnings were attributed to the lack or insufficiency of numerous internal controls.
In addition, Winslow’s lawsuit sought repayment of more than $1 million in bonuses and stock options paid to the bank’s top executives and others based on the incorrect 2009 financial report. Sixty-two other executives also received bonuses based on the reports.
Randy Burchfield, BancorpSouth’s spokesman, declined comment when asked if the bonuses were repaid.
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