The year-long legal battle for control of Financial General Bankshares is moving rapidly, toward a series of decisions that could determine finally who will run the $2.2 billion Washington bank holding company.
On Monday, the Maryland attorney general will issue a ruling on a state law that appears to ban an uninvited takeover of a Maryland bank.
If, as expected, the attorney general upholds the law, it will throw up a new roadblock for the group of Middle Eastern investors trying to buy controlling interest in Financial General.
It is the Federal Reserve Board that has the ultimate authority to determine whether to permit the Middle Eastern group to buy control of Financial General. But the board cannot approve a takeover that violates state law, the comany's lawyers contend in their arguments against the move.
Thus, a negative attorney's general ruling will force the Middle Eastern group to either go to the Maryland courts to overturn the ruling, or to convince the Federal Reserve it legally can ignore the state.
The Federal Reserve has decided that question is one of two legal issues that must be resolved first in its consideration of the plan.
The other potentially precedent-setting issue before the Fed is whether it legally can transfer control of a multistate bank holding company corporation.
Banking companies are prohibited by a law passed 20 years ago from operating in more than one state. Financial General is one of about a dozen multistate banking companies that were in existence when the law was passed and were permitted to continue.
The Federal Reserve Board has never before faced the question of whether that exemption from the interstate banking ban can be transfered.
Lawyers for the Middle Eastern group contend that transferring Financial General's exemption to a new company is no different than new investors buying control of Financial General. That's how the company's present management gained control.
The other major decision coming up is in U.S. District Court, where Judge Oliver Gasch has been asked to dismiss former Budget Director Bert Lance from the lawsuit over control of the company.
Lance and his wife, La, Belle, have sold their stock in Financial General and no longer are involved in the effort to buy control of the company, Lance's lawyers said in a motion filed this week.
Removing Lance from the lawsuit may not affect the outcome, but it will certainly diminish public interest in the case.