ROANOKE -- A Lynchburg stock broker has filed an $11 million lawsuit against the board of directors of Colonial American Bankshares for allegedly misinforming stockholders about an offer from Central Fidelity Banks to buy Colonial shares.
Paul Wisman, who filed the suit Tuesday in U.S. District Court, said Central Fidelity had offered to pay $19.62 1/2 more than the market price for the Roanoke company's shares.
But the Colonial American board had decided to reject any purchase offer for the company, regardless of the price and regardless of whether a better figure could be negotiated, according to the suit.
Wisman's lawsuit grew out of a proxy fight in which a stockholder committee won almost 40 percent of the vote for its slate of four directors in an April election. All of Colonial American's candidates were elected.
Wisman was a losing candidate for a seat on Colonial American's board at the annual stockholders' meeting. He said he would have been elected a director "but for the unlawful actions of defendants."
The Colonial American Shareholders' Committee, formed by Wisman and five other men, has disbanded, according to John Tansey, one of the lawyers for the group. The committee had urged the directors to accept the Central Fidelity offer.
The lawsuit alleged that a proxy statement March 26 from Colonial American failed to disclose negotiations with the committee and failed to report that Colonial American National Bank had voting control of more than 5 percent of the holding company's shares.
The suit said Colonial American also failed to submit a stockholder solicitation letter for Securities and Exchange Commission review as required by law.
Wisman said American Colonial's letter was "misleadingly selective and omitted material information concerning the poor performance" of the company compared with other banks the same size.
He asked the court for an injunction ordering a new election of Colonial American directors. He also asked for $604,565, which he said he lost because the board turned down the offer last fall, $450,000 in expenses for the opposing stockholder committee and $10 million in punitive damages.
William F. Hawkins, Colonial American chairman and one of the defendants in the suit, said, "'as far as we know, in preparation for our proxy contest and in the Central Fidelity matter, I know of nothing we did not do properly."
Thirteen Colonial American directors were named as defendants