Attorneys for depositors in Tulsa's failed Republic Bancorporation
Inc. and related companies are hopeful that a ruling ma de last
January in an Illinois U.S. district court will support their
contention that debt instruments issued by the Republic entities were
A class action suit filed in Sept. 1984 charges that Republic
Bancorporation, Republic Financial Corp., Republic Trust and Savings
Co., all of Tulsa, and Western Trust and Savings Co. of Oklahoma
City, were engaged in the offering and sale of securities to the
Defendants in the suit are Peat, Marwick, Mitchell and Co.,
Sunbelt Bank and Trust Co. (formerly Republic Bank and Trust Co.),
Republic Bancorporation and directors of the institutions in
September1984. It alleges securities fraud, common law fraud, and
aiding and abetting in the sale of unregistered securities.
The suit seeks actual damages of $72.2 million and exemplary
damages of $722 million.
Counsel for the depositors are now working to prove that the notes
of indebtedness sold by the Republic entities meet the criteria of
securities laws, said Steven E. Smith of Smith, Hanson & Holmes, the
firm which filed the suit.
The instruments in question are money market thrift certificates,
negotiable rate term thrift certificates, savings trust certificates,
savings plans, promissory notes and savings accounts.
In addition, Smith said, they must satisfy the court that the
institutions had no regulatory protection besides securities laws,
and were not insured.
The case of Banowitz vs. the State Exchange Bank of Culver, Ind.,
which was decided in Illinois on Jan. 18, is "closely analogous" to
the Republic case, he noted.
In that case, the court held that instruments sold by a
bank-related finance company were securities.
- Owners of the State Exchange Bank incorporated the State
Exchange Finance Co., which made commercial loans to persons and
corporations, according to the judge's opinion on the case. The
shareholders of the bank were also shareholders of the finance
company, and the two shared common officers and directors.
- Bank employees conducted all of the finance company's
business, according to the opinion, and the finance company was
located in the bank's main office building.
- The Republic class action suit charges that Republic
Bancorporation owned Republic Financial, Republic Trust, and
controlling interests in Republic Bank, later renamed Sunbelt Bank.
Western Trust and Savings Co. of Oklahoma City was a branch of
Furthermore, the class action cites "interlocking members of the
board of directors," and notes that seven of the defendants served
simultaneously on the boards of the holding company, the bank,
Republic Financial and Republic Trust.
- State Exchange Finance Co. cited in the Banowitz case became
insolvent and filed for Chapter 11 protection under the U.S.
Bankruptcy Code. The court opinion cited insider transactions,
transfer of faulty loans from the bank to the company and payment of
cash by the company to the bank for certain real estate collateral. …