`Troubled' Riggs reportedly hires Lehman to help sell it

D.C.'s establishment bank recently was fined

May 29, 2004|By BLOOMBERG NEWS

WASHINGTON - In the past month, Riggs National Corp. has paid a $25 million government fine, lost three executives and been labeled a "troubled" bank by regulators.

Now Riggs, whose customers include the Saudi Arabian Embassy, is for sale, people familiar with the matter said yesterday.

Riggs, which had a market value of $543 million as of yesterday, hired Lehman Brothers Holdings Inc. to help sell the company, the people said on the condition that they would not be named.

The bank, accused by regulators of failing to enforce anti-money laundering rules, is contacting potential buyers such as Citigroup Inc. and Wachovia Corp., the people said.

"The regulators have been putting significant pressure on the controlling shareholder, Joe Allbritton," said James Record, an analyst at Moors & Cabot Inc.

Riggs said yesterday, in a statement confirming its hiring of Lehman, that it "is in the process of considering its strategic alternatives, which include a possible business combination with a third party. No assurances whatsoever can be given that Riggs will enter into a definitive agreement with a third party for any such transaction."

Riggs' shares climbed $3.10, or 16.5 percent, to close at $21.84 yesterday on the Nasdaq stock market.

Joe L. Allbritton, who held a 31 percent stake as of the end of March and remained vice chairman and a director of Riggs after relinquishing his chief executive officer title, ran the bank from 1983 until 2001. He handed control to his son, Robert Allbritton, 35, three years ago.

A buyer would get a bank with 28 branches in Washington, 13 in Virginia and nine in Maryland, along with offices in London, Berlin and Nassau, Bahamas. Riggs spokesman Mark Hendrix declined to comment, as did Lehman spokeswoman Kerrie Cohen.

Joe Allbritton left the company's board yesterday amid federal investigations into its dealings with foreign countries. His wife Barbara, 66, left the board of Riggs' main bank subsidiary, Riggs Bank.

Federal investigators concluded that Riggs failed to report suspicious transactions to banking authorities, the U.S. Office of the Comptroller of the Currency said earlier in the month. Riggs neither admitted nor denied wrongdoing.

The bank was also ordered to develop a plan to follow terms of the Bank Secrecy Act, requiring banks to file reports on large cash transactions. The law is meant to prevent money laundering to hide illegal drug deals or terrorist activity.

Riggs has focused on its diplomatic and embassy customers, providing them with deposit, foreign exchange and cash-management services. Riggs also counts diplomats and embassy employees among its individual customers.

A quick sale might be for $24 to $25 a share, Record, the analyst at Moors & Cabot, said. Investors might get "in the low thirties" in about 18 months if new management executes a turnaround strategy that includes investment in branches and the sale of international operations, he said.

The OCC described the Riggs Bank as in a "troubled condition." The designation means Riggs must obtain OCC's approval for new directors or executive officers and is restricted in making severance payments to directors and employees.

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