The former directors of Venture Financial Group, the one-time bank-holding company of Venture Bank, failed in their duty to carefully manage employee stock ownership plans, resulting in an estimated $12 million loss to those retirement plans, according to a class-action lawsuit filed in U.S. District Court.
The 62-page lawsuit, filed this month in Tacoma, seeks to recover losses to the employee stock ownership and 401(k) plans. It was filed by two Olympia women, Sandi Wilson and Synthia Lisi, both of whom were participants in the plans, according to the suit. Wilson, contacted Tuesday, referred all questions to her Seattle-based attorneys. The attorneys could not be reached.
A representative of Venture Financial Group of Lacey also could not be reached.
The lawsuit targets Jan. 1, 2008, through Sept. 11, 2009, a period that Venture Financial Group and its directors “imprudently” held the employee stock ownership plans’ assets in company stock, despite the fact that they were aware of or should have known that they were engaging in risky investments, the suit says.
“With few and limited exceptions, the plans’ participants were unable to rid themselves of the company stock that formed such a large chunk of their retirement savings,” the lawsuit states. “The catastrophic failure of the bank through serious mismanagement left Venture Financial a shell and rendered the company stock worthless.”
Among those Venture Financial directors named as defendants in the suit are Ken Parsons Sr., the former chairman and chief executive of Venture Financial; Jim Arneson, the former president and chief executive of Venture Bank; and Sandra Sager, the former chief financial officer for Venture Bank. It also names nine other directors.
Although the suit was filed by Wilson and Lisi, it has class-action status because the employee stock ownership and 401(k) plans are thought to cover more than 500 people, court documents show.
Some of the alleged risky investments highlighted in the suit are:
• A $42.3 million investment in preferred stock of Freddie Mac and Fannie Mae, nearly all of which was wiped out after the two mortgage giants were taken over by the federal government.
• A $42.7 million investment in financial instruments known as collateralized debt obligations, which “the bank did not adequately evaluate” and which “severely depreciated due to distressed market conditions.”
• Engaging in “excessive” real estate acquisition, development and construction loans, which at one point represented 470 percent of the bank’s total capital.
Alleged hazardous lending and investment practices resulted in raising the bank’s adversely classified assets to $209.8 million in 2008, up from $8.2 million in 2007, an increase of more than 2,450 percent, the suit shows.
Meanwhile, the company stock began to fall, according to the suit.
Although Venture Financial’s stock was not publicly traded, it was valued at $18 a share at the end of 2007. From June 2008 until year’s end it fell from $14 a share to 25 cents a share, the lawsuit shows. Company stock in the employee stock ownership plan was valued at $6.6 million and company stock in the 401(k) plan was valued at $5.3 million at the end of 2007.
“This $12 million retirement investment of the plans’ participants is now completely wiped out as a result of the fiduciary breaches detailed herein,” the lawsuit states.
Venture Bank was closed by state and federal regulators and sold to First-Citizens Bank & Trust Co. of North Carolina on Sept. 11. Although Venture Bank is gone, Venture Financial continues under the direction of Parsons and Arneson, according to SEC filings. The filings also show the company has $2.5 million in assets and $29.5 million in liabilities.
Rolf Boone: 360-754-5403