Investors Allege Fraud in Deal for Burbank Bank
By KATE BERRY
Staff Reporter
Former investors of Western Security Bank have filed suit against executives of the Burbank financial institution, alleging they engaged in fraud and “corporate waste” by taking golden parachutes that pay them 80 percent of their salaries over the next 15 years.
The lawsuit, filed in L.A. Superior Court, alleges that four top officers misappropriated $19 million through fraudulent business expenses, including payments for country club memberships and construction on their homes while the bank was financially insolvent.
Western Security Bank was sold in 2002 to CVB Financial Corp., parent of Citizen’s Bank in Ontario, for $6.2 million. Citizen’s Bank agreed to take over “salary continuation agreements” that would pay $8.2 million to the executives over the course of 15 years.
“The salary continuation agreements were a vehicle by which the (executives) looted the bank of approximately half of its fair market value,” the lawsuit stated. “There was no legitimate or justifiable business purpose for the bank’s entering into the salary continuation agreements. At the time of the sale, the bank was unable to satisfy regulatory requirements and was not a viable bank.”
Minority investors allege that the bank’s chairman, John C. Bell, and three other officials, controlled 69 percent of outstanding shares, the suit said. The executives signed their own golden parachute deals with no due diligence or opposition, the lawsuit states; salary agreements also were not disclosed to shareholders.
Bell was paid $118,000 in 2002, plus $10,000 a month for the next 15 years, totaling $1.8 million. Jerome E. Farley, president and chief executive, received a payment of $173,000 in 2002 and $14,000 a month for 15 years, totaling $2.5 million. Edward J. Mylett Jr., chief operating officer, received $143,000, plus $11,500 a month for 15 years, or $2.1 million. Joseph L. DeMieri, chief financial officer, was paid $118,000 plus $10,000 a month for 15 years, or $1.8 million.
Last year, plaintiffs sued Western Security and its top executives to compel them to turn over the salary continuation agreements to investors. A Los Angeles Superior Court judge ruled in favor of the plaintiffs.
The plaintiffs, Anthony Stella, Jack Leeney and Ralph Sorrentino, initially became minority investors in the bank because they knew Bell as a fellow member of Lakeside Country Club.
Neither the defendants nor their lawyers could be reached for comment.
