The Bank of Virginia Co. has fired a vice president for attempting to sell 300 shares of its stock from his personal portfolio prior to the public announcement of the Virginia bank's intention to acquire Union Trust Company of Baltimore.
The incident, which occurred on July 16, was disclosed three days after insider trading allegations surfaced involving the president of United Virginia Bankshares Inc., Douglas H. Ludeman.
UVB said this week that Ludeman had bought stock in the three unnamed Maryland bank holding companies UVB was considering acquiring or investing in.
At a July 22 board of directors meeting, Ludeman, who is due to become UVB's chairman Sept. 1, was directed to sell the $124,000 in stock back to the bank at the price he paid for it.
The Bank of Virginia official, whose name has not been made public, placed an order to sell Bank of Virginia stock after attending a closed meeting outlining the company's plans. However, after discussing the matter with a superior, the vice president rescinded the transaction.
On the day in question, July 16, Bank of Virginia stock dropped 3 1/2 points. Yesterday it closed at 27 7/8, up one.
Bank of Virginia spokesman Joseph Ward said the man, a 17-year company veteran in a staff support position in the Richmond area, was fired for violating conflict of interest rules prohibiting employes from benefitting at the company's expense.
UVB's audit committee found that Ludeman violated its standards of conduct "prohibiting personal use of confidential company information, conflicts of interest and the appearance of impropriety."
Ward said no report was made to the Securities and Exchange Commission on the Bank of Virginia employe because the sale had not actually taken place.
An SEC spokesman said he did not know if there had been a violation.
UVB's Ludeman, however, said he has received a telephone call from the SEC and has referred the matter to counsel.
Making a profit or avoiding a loss by trading on nonpublic information is illegal and can lead to heavy civil and criminal penalties for anyone found guilty.
In a related development, UVB has issued an order to all employes requiring them to check with the company lawyer before buying stock in any banks in the southeastern United States. This area is part of the 13-state regional banking pact that Virginia signed earlier this year. Banks from Virginia will be able to acquire banks in the coastal states and vice versa.
Regional banking, spurred by a recent Supreme Court decision, is growing rapidly.
UVB announced plans last March to buy NS&T Bankshares in the District. And Sovran Bank plans to acquire D.C. National.
As the prospects for mergers increase, so do the stock prices of potential target banks.