The lawsuit notes that Sterling's stock price has imploded as the result of ill-advised commercial real estate, construction and land loans, improper accounting and inadequate capitalization.
Sterling and other defendants failed to properly manage pension funds by maintaining a large investment in Company Stock long after the stock became an imprudent investment - a violation of the federal Employment Retirement Income Security Act (ERISA), the complaint states.
Attorneys representing Oregon plaintiff Corey Deter estimate over 2,500 employees in Washington, Oregon, Idaho, Montana and California are affected by the actions listed in the complaint.
The lawsuit charges that the company deliberately misled employees and shareholders on the value of the stock and failed to secure adequate reserves against its credit portfolio. Employees in the class include those who owned stock in the Sterling 401(k) from July 23, 2008, to the present.
In the wake of its diving stock performance, Sterling failed to adequately and timely record losses for its impaired loans and secure assets to safeguard against its defaulting credit portfolio. As a result, Sterling stock traded at artificially inflated prices during the class period, reaching a high of $14.72 per share on Oct. 1, 2008, the lawsuit states. As of last Friday, the beleaguered stock closed at 70 cents per share.
Sterling Bank is one of the largest commercial banks headquartered in Washington. It is one of the largest regional community banks in the U.S. that offers mortgage lending, construction financing and investment products to individuals, small business and commercial organizations and corporations. Golf Savings Bank, a branch of Sterling, focuses on the sale of single-family residential mortgage loans.
The lawsuit charges that Sterling deliberately misled employees and investors and mismanaged its pension plan on a number of fronts, noting specifically that Sterling:
-Failed to account for and disclose Sterling's commercial real estate, construction and land development loans and failed to reflect impairment in the loans;
-Failed to adequately reserve for loan losses, such that Tier 1 capital was presented in violation of banking regulations and Generally Accepted Accounting Principles (GAAP). As a result, Sterling would be forced to consent to a cease and desist order from the Federal Deposit Insurance Corporation (FDIC) directing it to raise $300 million in capital;
-Failed to adequately account for its goodwill or its deferred tax assets such that its financial statements were presented in violation of GAAP.