Bank sued for $12 million

By Michelle Dmytryszyn | The Central Virginian |Feb. 13, 2020

A long-time employee is suing Louisa-based Virginia Community Bank, its holding company and four other defendants for $12 million, claiming she and her colleagues were cheated out of their retirement benefits.

The class action lawsuit was filed in August 2019 in federal district court in Charlottesville.

In her lawsuit, Janice Moore names A. Pierce Stone, Ronald Spicer, John Hodge and H.B. Sedwick III as the four other defendants. Stone and Spicer were high-ranking directors and officers of both the bank and the holding company. Stone, Hodge and Sedwick were trustees of the bank’s retirement plan, also called an employee stock ownership plan (ESOP).

In an ESOP, retirement funds are invested primarily in company stock and the employer, or in this case, the holding company, is responsible for making sure benefits are available to plan participants at the time of retirement.

The lawsuit claims the defendants violated federal law by fraudulently inflating stock prices for personal gain and saddling plan participants with debt that should have been assumed by the holding company.

The defendants filed a motion to dismiss the lawsuit, claiming Moore waited too long to file the lawsuit. They also deny the allegations of fraud.

Moore was an employee at the bank for more than 33 years. Her last position was manager of the Mineral branch before she resigned on May 1, 2018.

In the lawsuit, Moore claims she lost over $60,000 in retirement benefit contributions from 2006 to 2016 and the value of her retirement account diminished by an additional $68,000. She argues that many of her colleagues suffered similar losses.

The defendants allegedly obtained an improper appraisal to justify the inflated stock value, enabling two bank executives to cash out their ESOP stock at a higher rate and receive a windfall of $1.5 million. As alleged, the holding company did not have enough money on hand to cash out the stock, so the defendants financed the purchase with a loan from the bank to the ESOP.

In the lawsuit, Moore states that she “expressed concerns regarding the loss in value of her ESOP benefits” in a letter to Preston Moore, the bank’s president (no relation to Janice Moore), in February 2017. Two months later, Preston Moore responded in a letter claiming there wasn’t anything inappropriate about obtaining a loan to satisfy obligations to plan participants.

“Mr. Moore’s assessment of his predecessors’ actions was wrong,” stated Janice Moore in the lawsuit. “The obligation to repurchase stock from a former participant who elects cash instead of stock is an obligation of the plan sponsor, in this case the holding company, and not the ESOP.”

In the lawsuit, Moore alleges, “the defendants lined their own pockets at the expense of the [plan] participants.”

According to the defendants, the events alleged in Moore’s complaint took place between 2006 and 2008. They argue that federal law requires a lawsuit concerning retirement benefits to be filed within six years after the last specific action has occurred. The defendants claim Moore should have filed the lawsuit by 2014. Moore argues the 2014 deadline doesn’t apply because the loan wasn’t fully repaid until 2016, which is when the last specific action occurred — not in 2008 when the loan was distributed.

According to Moore’s lawsuit, federal law also states that plan participants can sue within six years of having concrete knowledge that misconduct occurred in fraud and concealment cases. Moore alleges she didn’t receive concrete evidence until 2017, when she sent a letter to Preston Moore, although she “suspected misconduct as early as 2014 or 2015.”

In her lawsuit, Moore argues, she and other ESOP participants “still remain in the dark about many of the concealed details of the 2006-2008 ESOP transactions.”

During her tenure at the bank, Moore claims that she and others were discouraged from asking questions about the retirement plan. When she began making inquiries in 2017, she claims the defendants “initiated questionable performance charges against her.”

Judge Glen Conrad determined at a hearing on Jan. 29 that he needs additional documents from the parties before he can proceed with the case.

If Moore wins, up to 90 people who worked at the bank and owned stock in their employee stock ownership plan may benefit.

Virginia Community Bank’s merger with Blue Ridge Bank of Luray in December has no impact on the pending lawsuit.