A federal judge in Baltimore has dismissed three lawsuits by disgruntled shareholders of MNC Financial Inc., saying the plaintiffs hadn't proved that the company's failure to disclose problems in its loan portfolio in late 1989 and early 1990 added up to fraud.
U.S. District Judge J. Frederick Motz said the plaintiffs were never able to show anything more than a general suspicion that MNC officials, including former chief executive Alan P. Hoblitzell Jr., had knowingly concealed that MNC's real estate loan portfolio was deteriorating.
But he left open the possibility that the suits could be filed again if public agencies, plaintiffs in other lawsuits or other sources turn up the hard evidence of fraud that the plaintiffs didn't have in the suits that were dismissed.
"Fraud cannot be alleged merely on the basis of suspicion, and . . . a fraud suit cannot itself be the vehicle for initially uncovering the fraud," Judge Motz said in a Jan. 10 memorandum.
"The fact that loans fail does not itself demonstrate that they constituted unacceptable risks when they were made. It may well be that their default is attributable to a general economic downturn in MNC's lending area."
Attorneys for the two sides in the case couldn't be reached for comment yesterday.
The suits were filed shortly after MNC, the financially troubled parent company of Maryland National Bank and Washington-based American Security Bank, announced in April that it would add millions of dollars to its loan-loss reserves during the first quarter of 1990.