Ohio Bank And Former Executive Settle Lawsuit Involving Misuse Of ESOP Assets

Archived News Release — Caution: Information may be out of date.

Charter One of Cleveland and the former chairman of the predecessor company — Haverfield Corp. — have agreed to a settlement with the U. S. Department of Labor providing for payment of $70,000.00 to the participants of the company’s employee stock ownership plan (ESOP) as restitution for improperly purchasing corporate stock for the plan at artificially inflated prices.

Money restored to the plan will be allocated to the individual accounts of all plan participants except defendants Peter Shimrak and Jacques Pomeroy, formerly the chairman and director of Haverfield Corp., respectively. Under the settlement, all charges were dismissed against Pomeroy.

Haverfield Corp. was the holding company for Home Bank, FSB until September 1997 when it was merged with Charter One. Home Bank operated 11 full-service offices throughout northeast Ohio. The ESOP covered 179 employees of Haverfield Corporation and had assets of $2,160,638 as of Dec. 31, 1994.

The lawsuit, filed on May 29, alleged that the defendants violated the Employee Retirement Income Security Act (ERISA) by purchasing stock of and from the Haverfield Corp. for the ESOP at inflated prices.

According to the lawsuit, Haverfield Corp. and Pomeroy committed the ESOP to purchase between 75,000 and 80,000 shares of Haverfield common stock in March 1991 over the course of a 30- day period of time. The defendants also caused the ESOP to purchase 31,625 shares from Shimrak. Purchases of the stock, which traded on the NASDAQ Exchange, allegedly caused the stock’s price to artificially rise from approximately $8.50 per share to $11.125 per share. Prior to the ESOP purchases, the stock traded at $8.375 per share. After the stock purchases, Haverfield common stock closed at $9 per share on April 30, 1991.

As part of the settlement, a consent order and judgment was filed on June 17 and entered by the federal district court on June 21 in Cleveland. This case resulted from an investigation conducted by the Cincinnati Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of ERISA.

(Herman v. Charter One Financial, Inc.)
Civil Action No. 1:98CV1247

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Archived News Release — Caution: Information may be out of date.

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