A federal judge has thrown out an investor's fraud claims against three top-ranked Baltimore Bancorp officers and 16 directors in a lawsuit that grew out of the banking company's rejection of a $17-a-share takeover bid by First Maryland Bancorp last year.
In an opinion filed yesterday in U.S. District Court here, Judge Marvin J. Garbis granted all of the individual defendants' dismissal motions and left Baltimore Bancorp as the defendant in the case.
Garbis also dismissed Alex. Brown Inc., Baltimore Bancorp's adviser in the First Maryland deal, as a defendant in the suit.
The judge said plaintiff Frank Tischler, a Parkton investor, sued some of the individual defendants "indiscriminately" and may have "filed his complaint in order to give his counsel the opportunity to engage in discovery and search for a cause of [legal] action."
Garbis said his ruling does not mean there is "any merit, or even any substance" to Tischler's claims against Baltimore Bancorp, merely that the case "cannot be dismissed . . . at the pleading stage."
Tischler alleged that Baltimore Bancorp's officers and directors violated the 1934 Securities and Exchange Act by hiding from stockholders "adverse material information" about its loan portfolio and sagging "finances, financial condition and future prospects" while they twice rejected First Maryland's stock tender offer last May as inadequate.
First Maryland Bancorp, a subsidiary of Allied Irish Bank, renewed the tender but withdrew it last November, which caused Baltimore Bancorp's stock to plummet from about $10 to $11 a share to about $5 a share. The stock closed yesterday at 8 7/8 .
Tischler bought 500 shares of Baltimore Bancorp common stock Aug. 31, 1990, for $9.50 a share. He stood to make a profit of $3,750 had the banking company accepted First Maryland's $17 offer.
Garbis, however, firmly rejected Tischler's claims that Baltimore Bancorp officials knowingly engaged in "culpable conduct." The judge said Tischler failed to detail facts which support such allegations against the individual defendants.
The suit named Harry L. Robinson, chairman of the board and executive committee of Baltimore Bancorp; John C. Haigh, president and chief executive; James H. Langmead, controller and chief financial officer; and 16 directors as the individual defendants.
Tischler also claimed that Alex. Brown's advice to Baltimore Bancorp -- that the stock was worth $20 to $22 a share -- was "slipshod" and negligently based on "pure conjecture" after officials at the Baltimore brokerage reviewed the company's financial records while the tender was alive.
"The charge of fraud against Alex. Brown threatens the reputation of an investment banking firm, which, like an accounting or law firm, relies heavily on its reputation for honesty and careful work for continued business," Garbis said.
However, he left open the possibility that Tischler may renew his claim against Alex. Brown Inc. and the individual defendants if he can obtain sufficient facts to support such claims.