SAN DIEGO, June 24, 2009 (GLOBE NEWSWIRE) -- Alabama State Court Judge Houston Brown entered a temporary restraining order today, prohibiting Regions Financial Corp.'s 25 most highly paid executives for fiscal years 2006-2008 from dissipating tens of millions of dollars in incentive compensation they received based on the disastrous 2006 $10 billion AmSouth Bancorp acquisition.
The Louisiana Municipal Police Employees Retirement System (LAMPERS), a $1.6 billion retirement fund that manages the retirement savings of thousands of Louisiana police officers, employees and their families, sought the injunction after Regions executives refused to agree to segregate during the pendency of shareholder litigation an estimated $155+ million worth of challenged incentive compensation. LAMPERS filed suit last month against Regions' Board of Directors and certain of the Company's current and former executives.
The action, brought on behalf of Regions itself and its shareholders, alleges that the defendant officers and directors breached fiduciary duties owed to Regions shareholders, committed corporate waste and unjustly enriched themselves, first by effectuating the ill-conceived and highly dilutive $10 billion AmSouth acquisition and then by paying themselves tens of millions of dollars in bonuses.
Shareholders assert that after Regions was forced to take a $6+ billion write-down on the AmSouth acquisition in January 2009 and after accepting $3.5 billion in TARP bailout funds in October 2008, the Regions Board approved in late February millions of dollars in additional employee and executive bonuses. These bonuses were based in large part on the illusory "success" of the AmSouth acquisition. These bonus payments were not disclosed until March.
By May of this year, the federal government announced that Regions had also failed its "stress test" forcing Regions to raise another $2.5 billion in capital. Regions executives immediately slashed the shareholder dividend from its original level of 38 cents a share down to a penny a share and stopped funding the retirement accounts of Regions' rank and file. This, the executives now claim, was imperative to preserve cash. Even as they instituted these "cash saving" cuts, Regions executives made no offer to repay the challenged incentive compensation.
David R. Scott of Scott+Scott, lead counsel for LAMPERS, explains that the injunction helps preserve Regions' remedies to recapture the challenged compensation.
"Entry of this TRO temporarily preserves the money in question," Scott said. "A full preliminary injunction, if granted, will lock up the $155+ million in executive compensation Regions executives received until this action is resolved."
According to Scott, the successful prosecution of this case will be a hollow victory if the executives are permitted to simply remove their assets from the Court's grasp before judgment.
"With an injunction in place, the focus is on prosecuting this case rather than turning a blind eye to wasting executive assets and hoping something is left at the end of the day," notes Mary Blasy, another Scott+Scott attorney.
Protecting corporate assets is largely perceived as one of the most important functions of corporate officers and directors. According to shareholders in this action, however, Regions' senior executives and directors failed to protect the company's assets or put its interests above their own. According to Scott, "When that happens, shareholders must step into the shoes of the Board and do it themselves."
Representing Regions shareholders, LAMPERS General Counsel R. Randall Roche stated, "We are pleased with this development. Judge Brown's order demonstrates that shareholders are not powerless to protect their rights."
For more information about this action please contact the firm (800-404-7770). For information about the Scott+Scott firm, please visit the firm's website (http://www.scott-scott.com/). Scott+Scott LLP is a national law firm with offices in Connecticut, California, New York and Ohio. Scott+Scott is active in major litigation pending in federal and state courts throughout the United States where it represents foreign and domestic investors and pension funds, small businesses and consumers. The firm has taken a leading role in many important actions on behalf of defrauded investors, consumers, and small businesses.