A new case filed this week alleges bank officials imprudently kept a stock fund in their plan.
Plaintiff John Dudenhoefer, a Fifth Third employee from Collier County, Florida, charged in the suit filed in the U.S. District Court for the Southern District of Ohio that the bank hid its true financial picture leading to its stock price to be artificially inflated.
The stock suffered a major plunge in its share price when the company’s financial problems were revealed.
Attorney Ronald R. Parry of Covington, Kentucky, filed the suit on behalf of Dudenhoefer, requesting that the case be certified as a class action for participants in the Fifth Third Bancorp Master Profit Sharing Plan between October 19, 2007 and the present.
The suit alleges the bank’s action caused the plan to lose millions of dollars. Among a long list of defendants was Kevin T. Kabat, the bank’s president and CEO.
Dudenhoefer’s suit charges that the bank did not disclose that: its operating expenses were rapidly increasing;it was suffering higher loan losses because of “weakening credit quality;”
it needed a cash infusion because of its fiscal problems.
A Share-Price Meltdown
On June 18, 2007, the company revealed its true financial condition and announced plans to raise $2 billion in capital and slash its dividend 66% due to mounting credit losses. On this news, the company’s shares plunged 27% to close at $9.26 per share after heavy trading. That represented a decade low price, according to news reports.
The news reports said the bank also announced that it would cut its dividend, sell non-core assets, and issue convertible preferred stock to improve its capital position.
Headquartered in Cincinnati, Fifth Third has 18 affiliates with about 1,300 banking centers and more than 2,000 ATMs in Ohio, Kentucky, Indiana, Georgia, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, and Missouri.
The lawsuit is available here.