Officers and directors of failed Colonial BancGroup in Alabama, including Auburn University trustee Bobby Lowder and former Auburn football coach Pat Dye, have agreed to pay investors $10.5 million to settle a class-action suit.
Terms of the proposed settlement were outlined in documents filed this week in U.S. District Court in Montgomery, the Birmingham News reported.
Lowder, Dye, gambling promoter Milton McGregor and 20 other former Colonial officials have asked the judge overseeing a parallel case in U.S. Bankruptcy Court to let them pay the settlement money with proceeds from an insurance policy.
The shareholders, led by the Arkansas Teacher Retirement System and other pension funds, contended that Colonial executives such as former CEO Lowder and board members like Dye and McGregor lied about the company’s soundness.
Colonial BancGroup was seized by federal regulators in 2009. It was one of the largest bank failures that year. Its branches and deposits were then sold to BB&T Corp. of North Carolina.
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