Disgruntled stockholders have renewed their bid for damages from MNC Financial Inc., its top officers and two former board members in a federal lawsuit that replaces three class-action suits a judge threw out of court in January.
Richard D. Greenfield, the lead plaintiffs' attorney in Pennsylvania, said the 125-page complaint filed in U.S. District Court here is "a new, improved version" of the ones dismissed by Judge Frederick N. Motz.
The new suit seeks unspecified damages.
Motz ruled that the old suits, which alleged securities fraud, lacked "particularity" and were based on "suspicion" in what appeared to be an attempt to use the civil discovery process to find evidence to support the claims.
As did the old suits, the new one alleges various forms of securities fraud, mismanagement and misrepresentation by the MNC officials in the days before the company's stock price plummeted from a high of about $29 a share in late 1989 to below $3 a share last fall.
An MNC Financial spokeswoman said the company would have no comment on the suit.
The plaintiffs contend that the MNC defendants violated various federal securities laws by misleading investors through false statements and misinformation regarding the health of the bank holding company's real estate portfolio.
The suit alleges that defendants' failed to recognize a glut of office construction in the Baltimore-Washington market while they continued to aggressively lend money in "ever more speculative" ventures.
The new suit also leans heavily on MNC Financial's April 15 proxy statement to support conflict-of-interest allegations against Carr and other well-connected developers who got hundreds of millions of dollars worth of allegedly questionable loans from Maryland National Bank, the largest bank in the state, and its Washington-based sister, American Security Bank.
Many of those loans are now in or near default, the suit says.
Plaintiffs are Alfred and David Asch, two Rockville investors.
Defendants include MNC Financial; Alan P. Hoblitzell Jr., MNC's former chairman; Daniel J. Callahan 3rd, former president and current executive vice president; William H. Daiger Jr., former MNC vice chairman and chief executive of Maryland National Bank, now MNC's executive vice president; and Oliver T. Carr Jr. and A. James Clark, two Washington area developers who were directors of MNC and American Security Bank.
The suit represents shareholders who bought stock between Jan. 17, 1989, and Oct. 25, 1990, who owned shares in Equitable Bancorp. when it merged with MNC last year; or MNC stockholders whose dividends were reinvested. The same shareholders were represented in the earlier suits.
Generally, the plaintiffs allege that MNC's officers and board members knew, or should have known, that they were facing an economic downturn in the banks' real estate loan portfolios, especially since several board members were directly involved in real estate development.
More specifically, the complaint alleges that the MNC board, including Carr and Clark, endorsed an "aggressive lending policy" for real estate and construction loans, from which the two directors stood to gain substantially during the then-booming market.
"The policy, while moderated by prudent financial institutions, was ultimately manifested in a hard mentality and excessive JTC competition to fund ever more speculative development projects," the suit says.
The suit borrows heavily in its detail from a similar lawsuit filed against many of the same defendants by Baltimore lawyers R. Thomas Radcliffe Jr. and Charles J. Piven, and a battery of lawyers in New York, Miami and Boston.
The latter suit is due for a court hearing before Judge Motz in June.