Vernon Hill sues Commerce Bank and its board for $50 million
WASHINGTON - Former Commerce Bancorp Inc. chairman and chief executive officer Vernon W. Hill II, who unexpectedly resigned last year, has sued the bank and many board members for $50 million.
WASHINGTON - Former Commerce Bancorp Inc. chairman and chief executive officer Vernon W. Hill II, who unexpectedly resigned last year, has sued the bank and many board members for $50 million.
The lawsuit, filed yesterday in U.S. District Court in Washington, alleged that Commerce directors forced Hill to resign under pressure from federal banking regulators, and that regulators from the Office of the Comptroller of the Currency threatened to make public unspecified "findings of fact."
"The OCC set upon a course to drive Mr. Hill out of Commerce based on unsubstantiated allegations" without interviewing Hill, and without finding that he did anything wrong, the lawsuit says.
A lawyer for Commerce, H. Rodgin Cohen, said today the lawsuit is without merit. "We intend to defend it vigorously," he said.
Hill resigned June 29 as federal bank regulators scrutinized long-disclosed, multi-million-dollar side businesses that he and his wife, Shirley, operated - renting real estate to Commerce Bank branches and furnishing them.
In the lawsuit, Hill alleges that he was unjustly removed and that the manner in which he was removed caused him emotional distress. The lawsuit also seeks $7.5 million in damages related to work performed by Shirley Hill's design company.
Andrew Sandler, the Washington lawyer who filed the lawsuit, said: "The bank ought to be paying Mr. Hill what they owe him and ought not to be bullying his wife because of disputes with Mr. Hill."
"This is a lawsuit that should have never had to have been filed and is easily resolved by the bank meeting its obligation to its founder and longtime CEO," Sandler said.
Cohen, the lawyer for Commerce, however, said that federal "golden parachute" regulations prohibited the bank from making contract payments to bank officers, such as Vernon Hill, without approval from the Federal Reserve and the Federal Deposit Insurance Corp., which oversee the bank's operations.
"When a bank is found to be in a 'troubled condition,' which does not necessarily mean financially troubled, you cannot make payments unless various findings can be made," Cohen said. "So that's the issue."
The federal scrutiny last summer led board members to encourage Hill to resign and the bank to enter a consent decree in which it promised to cease any further insider business transactions. The inquiry was conducted by the Office of the Comptroller of the Currency.
Under the consent agreement, the bank ended contracts with Shirley Hill's InterArch of Mount Laurel and with Vernon Hill's Interstate Commercial Real Estate Inc. Interstate also employs Vernon Hill's brother, Robert, and son, Vernon W. 3d.
The suit was filed on behalf of Hill, his wife and InterArch.
Commerce shares were down 39 cents to $36.52 in mid-afternoon trading on the New York Stock Exchange.