Shareholder sues bank over losses

January 22, 1994|By David Conn | David Conn,Staff Writer

A stockholder sued Baltimore Bancorp yesterday claiming he lost money a week ago because the company made misleading statements about takeover rumors, sending its stock on a roller coaster ride.

Francis C. Jemellaro of Baltimore claims in a 10-page suit filed in U.S. District Court that he suffered losses because he sold his stock prematurely based on statements the company made.

Mr. Jemellaro's lawsuit, filed by attorney Charles C. Piven, is asking the court to declare the lawsuit a class action, covering all Baltimore Bancorp shareholders who sold their stock during a brief period on Thursday, Jan. 13.

On that day, as trading in Baltimore Bancorp stock headed toward record volume, the Dow Jones News Service reported that the bank holding company was "mulling a $21 per share bid" from Mellon Bancorp. At the time Baltimore Bancorp's stock traded at about $15 a share.

A spokesman for Baltimore Bancorp, parent of the Bank of Baltimore, issued a statement at 10:30 a.m., saying the company had no comment on the stock's activity. Then, at 2:52 p.m., a second statement was released, saying the company was "not in negotiations with Mellon Bank regarding a possible sale of the company." After that announcement, Mr. Jemellaro sold 900 of his shares at $15.25 a share.

But after falling back to $15, the stock then started to rise again as investors apparently looked more closely at the company's statement.

More than an hour after the stock closed at $15.625, the company issued a third statement -- that one acknowledging it was in "preliminary discussions with several major bank holding companies regarding a possible sale of the company," and that it had hired investment bankers Alex. Brown & Sons to help with those talks.

The next day, after a brief delay, Baltimore Bancorp's stock opened for trading at $17 a share, and closed at $17.375 a share. Yesterday it closed at $17, up 12.5 cents.

According to Mr. Jemellaro's lawsuit, "At the time Bancorp denied being in negotiations with Mellon, it should also have disclosed that it was in discussions with other major holding companies."

Mr. Jemellaro's 900 shares would have gained about $1,575 in value between the time he sold them Jan. 13 and the time the market opened the next morning. The lawsuit notes "there are over 16 million shares of Bancorp common stock publicly outstanding, thousands of which were actively trading" during the relevant 78-minute time frame.

A spokesman said Baltimore Bancorp would not comment because it hadn't seen the lawsuit. Last Friday, however, Treasurer David L. Spilman told The Sun that, "we were under no obligation to do the last release" after the market closed.

A public company does not have to disclose merger talks, but it does have a duty not to make misleading statements, and to correct any statements that become misleading, said James J. Hanks Jr., a partner in the Baltimore office of Ballard Spahr Andrews & Ingersoll.

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