Shareholders of Opus Bank announced the proposed settlement of a class action lawsuit against Opus Bank, a California-chartered commercial bank, in November 2017. The expected agreed amount will be $17 million. Shareholder rights law firm Robbins Arroyo LLP represented the plaintiffs.
The allegations detailed that Opus misrepresented its financial condition in the company’s press releases and filings with the U.S. Securities and Exchange Commission by repeatedly touting its strong growth and performance and predicting a confident outlook for the company. However, the company lacked adequate internal controls over accounting and financial reporting and its loans were of poor quality. This is considered a violation of the Securities Exchange Act of 1934, which Opus’ directors and officers would have approved. On Nov. 13, 2017, three days after the settlement was revealed, Opus announced on its website that Kevin L. Thompson had been installed as its new EVP and chief financial officer.
Consequently, Opus had to recognize large charge-offs associated with many of its loans. When Opus disclosed on Oct. 17, 2016 that earnings for the third quarter of 2016 would include a $0.59 per diluted share impact from loan charge-offs and was expected to result in a net loss of approximately $0.05 per diluted share for the third quarter of 2016, Opus’s stock price fell $7.25 per share, or 21%, to close at $27.20 per share on Oct. 17, 2016.
The case was Schwartz v. Opus Bank, No. 2:16-cv-07991, and was filed in the U.S. District Court for the Central District of California. The Court must approve the settlement, which is still pending.