Synovus Financial Corp., facing a lingering class-action lawsuit on behalf of its shareholders, has settled the case with a late February hearing set in Atlanta for court approval.
The civil action, filed in U.S. District Court for the Northern District of Georgia, dates to July 2009. That's when the City of Pompano Beach (Fla.) General Employees' Retirement System filed the complaint against Synovus and several of its top executives over financial losses connected to the Sea Island Co., owner of a posh resort on the Georgia coast.
Judge J. Owen Forrester has ordered a 10:30 a.m. Feb. 26 hearing in his courtroom in Atlanta to go over terms of the settlement, which include $900,000 in attorney fees and expenses, as well as a $5,000 incentive award for the plaintiff.
Synovus spokesman Greg Hudgison said the Columbus-based company, which owns Columbus Bank and Trust, would have little comment on the litigation beyond court filings.
"To clarify, the settlement does not provide for any other monetary settlement other than the stated attorney's fees, and that provision of the agreement is subject to court approval," he said via email.
Synovus also issued what it called a "clarification" over a Bloomberg article that noted the bank's board will no longer be able to approve any loans under the settlement.
"In reality, the Synovus board has never been involved in the approval of individual loans, other than insider loans that are specifically required by law to have board approval," the company said via email. "These types of loans are not affected by this settlement."
The crux of the original lawsuit centers around those who invested in the company from Jan. 24, 2008, through Jan. 21, 2009. That's when the plaintiffs allege the bank's executives did not properly disclose financial losses connected to the Sea Island Co.
A loan, estimated between $200 million and $500 million in various reports, was consummated between now-retired Synovus Chairman and Chief Executive James Blanchard and Sea Island CEO Bill Jones III, who are longtime friends, according to court documents. Blanchard also at one time served on the Sea Island board of directors, while Jones served on the Synovus board.
The money loaned by Synovus to Sea Island was to be spent on improving and expanding the resort. But when the U.S. economy fell into a Great Recession, tourism business began to falter at Sea Island and the resort defaulted on the loan. Sea Island filed for bankruptcy in 2010 and was eventually bought out by an investment coalition that included Avenue Capital Group, Anschutz Corp., Oaktree Capital Management and Starwood Capital Group, according to reports.
At its heart, the lawsuit alleges Synovus and its top executive officers misled shareholders and did not write off loan losses connected to Sea Island in a timely manner. It said the company's stock was trading at "artificially inflated prices" during the class-action period, hitting a high of $13.49 per share on Feb. 1, 2008.
Synovus shares began tumbling after that, according to court documents, dropping to $4.75 per share on Jan. 22, 2009. That was after Synovus reported a net loss of $637 million, or $1.93 per share, in the fourth quarter of 2008.
The banking firm at that time charged off $443 million for a non-cash goodwill impairment charge, apparently because of its losses connected to Sea Island.
The lawsuit filings included a series of earnings report information, financial forecasts by executives and conversations with stock market analysts to paint a picture of Synovus' lending relationship with Sea Island.
"Defendants have denied and continue to deny that they breached any fiduciary duties to Synovus or current Synovus shareholders, or that they engaged in any misconduct whatsoever," the most recent settlement document dated Jan. 11 reads.
The Weiser Law Firm, with offices in Berwyn, Pa., is listed as the co-lead counsel for the plaintiff.
Shares of Synovus stock rose 6 cents on Tuesday, closing at $2.56 in trading on the New York Stock Exchange. The company's 52-week trading range is $1.58 to $2.71 per share.