A federal judge handed multimillionaire Joe L. Allbritton another setback yesterday in his attempt to gain control of Riggs National Bank, saying that Allbritton appears to have made false statements to shareholders when he offered to buy their stock.
U.S. District Court Judge Norma Holloway Johnson gave Riggs a victory by granting a preliminary injunction against Allbritton's efforts to gain control of the city's largest financial institution. But the setback was not fatal to Allbritton's efforts.
Johnson agreed to extend the deadline for the offer to buy Riggs stock until midnight Thursday after Allbritton's attorney, Michael Mitchell -- with just a minute to go before the stock offer was set to expire -- jumped up and asked for the extension. "It's not my intent to stop the offer," Johnson said.
Mitchell indicated that Allbritton would try to correct the statements and omissions that Judge Johnson objected to, hoping to persuade the judge to lift the injunction. Allbritton also could appeal the order.
Allbritton Communications issued a statement yesterday afternoon saying that Allbritton and his counsel are considering a number of courses of action that would allow the offer to proceed, including filing materials with the court providing the additional disclosure.
Johnson said that Allbritton failed to disclose that creation of a bank holding company proposed by Riggs and contemplated in another form by Allbritton might cause banks lending Allbritton money for the takeover to declare a default on the loan.
Johnson also said that Riggs had demonstrated a likelihood that it could prove at a trial that Allbritton's tender offer "contains untrue statements of material facts and omits material facts necessary" to make the statement not misleading.
She noted that the offer stated that no further approval by the Comptroller of the Currency is required for the stock purchase, but Johnson indicated further approval may indeed be required. She also said that the offer failed to disclose financial information about Allbritton, including his personal net worth, the value of his major assets and his plans for repaying the approximately $70 million borrowed for the takeover.
Allbritton offered to buy at least 600,000 shares of Riggs stock Feb. 9, promising to pay $67.50 a share for stock that had sold for $50 a share the previous week.
Riggs directors urged shareholders to reject the offer and later went to court to try to block the takeover. Allbritton's attorneys have characterized the battle as an attempt by a clubby management to save its own skin rather than a genuine effort to look out for shareholders' interests.
On Feb. 26, Johnson granted Riggs' request for a temporary restraining order preventing him from acquiring any of the shares that had been offered and extending the period of time during which shareholders could withdraw offers to sell stock to the former Washington Star owner.
The preliminary injunction continues those provisions until the issue can go to trial or is otherwise resolved.
Approximately 747,000 shares of Riggs stock have been offered Allbritton despite the court order, suggesting that only the court stands between the Texas millionaire and control of the venerable bank. The number of shares tendered has actually increased by about 5,000 since last week.
It's always better to win than to lose," said Riggs attorney Fred Vinson at the end of the hearing yesterday. Riggs officials issued a statement saying, "We are gratified by the judge's decision which we believe vindicates the position taken by the bank on behalf of its shareholders. We feel the decision is in the best interest of both the bank and its shareholders."
Some of the information Judge Johnson appeared concerned about has already come out in the course of hearings on Riggs' attempts to block Allbritton. Documents in the case put his net worth at approximately $200 million. Allbritton's financial empire includes companies involved in broadcasting, insurance, banking and the funeral business and spans California, Texas and Washington.