Blue Ridge Bank has been added as a defendant in the lawsuit filed against Virginia Community Bank, which it absorbed in a 2019 merger.
A judge in Charlottesville Federal Court, where the suit has been ongoing for more than two years, agreed March 30 to add the bank, and several more co-defendants, to the case based on an amended complaint filed by Janice Moore, the plaintiff.
Moore, a former Virginia Community Bank employee, contends that bank executives deprived numerous staff members of retirement benefits due to them through an ESOP, or employee stock ownership plan. She argues that VCB officials conspired to drive up the share price of stocks for personal gain and saddled employees who participated in the company’s retirement plan with unnecessary debt.
In the amended complaint, Moore alleges that VCB leaders hid news of a pending merger with Blue Ridge Bank from retirement plan participants. The merger caused stock prices to rise, which she argues benefited the executives who had advance knowledge of the deal.
“In 2018, armed with insider information about a contemplated merger transaction, [the defendants] purchased the ESOP stock for their personal gain instead of providing ESOP participants with an opportunity to share in the significant increase in stock value expected from the merger,” Moore states in the complaint.
In her original complaint, Moore named A. Pierce Stone, Ronald Spicer, John Hodge and H.B. Sedwick III as co-defendants with Virginia Community Bank, which was headquartered in Louisa County from the 1970s until the merger. Stone and Spicer were high-ranking directors and officers of both the bank and its holding company. Stone, Hodge and Sedwick were trustees of the bank’s retirement plan, also called an employee stock ownership plan (ESOP).
The amended complaint also names Blue Ridge Bank and current or former bank directors and staff Thomas Crowder, Andrew Holzwarth, Amy Schick, Preston Moore, and Mark Sisk as defendants.
In an ESOP, retirement funds are invested primarily in company stock and the employer, or in this case, the holding company, is responsible for making sure benefits are available to plan participants at the time of retirement.
Janice Moore was an employee at the bank for more than 33 years. Her last position was manager of the Mineral branch before she resigned on May 1, 2018.
In the original lawsuit, Moore claimed she lost over $60,000 in retirement benefit contributions from 2006 to 2016 and the value of her retirement account diminished by an additional $68,000. She argued that many of her colleagues suffered similar losses.
The defendants allegedly obtained an improper appraisal to justify the inflated stock value, enabling two bank executives to cash out their ESOP stock at a higher rate and receive a windfall of $1.5 million. As alleged, the holding company did not have enough money on hand to cash out the stock, so the defendants financed the purchase with a loan from the bank to the ESOP.
The defendants in the case argued in court that Moore had failed to show that they had the authority to make the financial decisions alleged in the new complaint. But U.S. Magistrate Judge Joel Hoppe wrote that it could be reasonably inferred that they did.