First Union's earnings warning prompts 2 shareholder lawsuits

Banking

June 10, 1999|By KNIGHT RIDDER/TRIBUNE

CHARLOTTE, N.C. -- First Union is facing two shareholder lawsuits stemming from the bank's May 25 warning that it will earn less than expected this year and the subsequent drop in its stock price.

The suits, which seek class action status, were filed this week. They claim that First Union issued "false and misleading statements" about its operating results and its integration of the CoreStates Financial Corp. and the Money Store Inc. acquisitions.

First Union has said its earnings will be lower in part because CoreStates and the Money Store have not performed as well as the bank anticipated when it bought those companies. The warning marked the second time in four months that the bank has lowered its earnings expectations.

Both suits seek damages on behalf of people who owned First Union stock between Aug. 14, 1998, and May 24, 1999.

First Union spokeswoman Ginny Mackin would not comment on the lawsuits yesterday, except to say that the bank is "reviewing the situation."

Shareholder lawsuits, filed after a company's stock dives and shareholders lose money, are becoming more common. More than a dozen lawsuits seeking class action status were filed against Bank of America in the fall after that bank disclosed losses on a hedge fund loan and its stock fell.

The First Union suits were filed in the U.S. District Court for the Western District of North Carolina.

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