U.S. District Court Judge Oliver T. Gasch has decided that four Arab investors trying to buy control of Financial General Bankshares Inc. cannot pursue a stockholder's lawsuit against the company's management.
Gasch dismissed the stockholder suit this week, after Financial General lawyers argued that the Arabs cannot claim to represent all stockholders when they are involved in a personal fight with the company's management.
The lawsuit accused Financial General's officers and directors of acting against the best interests of the stockholders by fighting the Arab takeover attempt.
Judge Gasch, however, kept alive one count of the lawsuit, which could prove critical in the lengthy struggle for control of the company, which owns a dozen banks, including Union First National of Washington, American Bank of Maryland and First American Bank of Virginia.
Gasch refused to dismiss the Arabs' challenge to proxies for large blocks of stock that are claimed by both the Arabs and Financial General President G.J. William Middendorf II.
Middendorf was given voting rights to the shares two years ago when he formed a group of investors to take control of the company.
When several of the stockholders became disillusioned with Middendorf they sold their shares to the Arabs. But Middendorf contended the proxies giving him voting rights to the stock were irrevocable and has claimed the right to vote the shares.
If the courts uphold Middendorf's claims, the Arabs will not be able to use the votes of stock in which they have invested millions of dollars.
That issue will continue to be fought in court, along with a companion lawsuit that Financial General has filed against the Middle Eastern group trying to take control of the company.
The claims that were dismissed by Judge Gasch had charged wrongdoing on the part of Middendorf, Financial General Chairman B. F. Saul and several members of the company's board of directors.