Executives at Florida-based lender BankAtlantic Bancorp Inc. failed to alert investors about risks in its real estate loan portfolio as the U.S. housing market collapsed, a Miami federal jury ruled Thursday in a rare securities fraud class action verdict.
The jury found BankAtlantic Bancorp officials misled shareholders on conference calls and failed to comply with proper lending procedures. The jury awarded $2.41 a share to investors who bought the company’s stock between April 26 and Oct. 26, 2007.
“It’s a great day for shareholders and a bad day for banks who lie to the public,” said Mark Arisohn, an attorney representing the investors.
“In none of the warnings did they say we have hundreds of millions of dollars in risky loans,” said Arisohn. “They never said that to the public.”
The case is the first securities class action stemming from the financial crisis to reach a jury verdict, according to the plaintiffs’ lawyers. Most of these kinds of cases have been settled out of court, Arisohn said.
Fort Lauderdale-based BankAtlantic Bancorp, one of the biggest banks headquartered in the state, has run up heavy losses in recent years because of bad real estate loans.
BankAtlantic Bancorp posted a wider-than-expected loss in the second quarter as it set aside more money to cover bad loans and announced it would sell its operations in Tampa, Florida, its strongest market.
“We are extremely disappointed with the verdict,” BankAtlantic Bancorp Chairman and Chief Executive Alan Levan said in a statement.
Lawyers for BankAtlantic argued during the trial the company had been up front about its risks.
Levan, in his statement, said the problems in the Florida housing market were well-known to investors.
“No one could fairly express either surprise or deceit when that risk materialized with the collapse of the Florida housing market in late 2007,” he said.
BankAtlantic plans to file a motion to set aside the verdict, he said.
“If this outcome is allowed to stand, it would take public companies back to the day before Congress passed the Securities Litigation Reform Act,” Levan added, referring to the 1995 law that raised the threshold for evidence in securities fraud cases.
BankAtlantic Bancorp shares fell 10.7 cents to close at 71 cents on Thursday, hitting their lowest this year in trading on the New York Stock Exchange.
The case is BankAtlantic Bancorp Inc. Securities Litigation, United States District Court, Southern District of Florida, No. 07-61542.
(Editing by Tom Brown, Andre Grenon and Steve Orlofsky)
Was this article valuable?
Here are more articles you may enjoy.