Posted on Thursday, November 4, 2010
An attorney for BankAtlantic Bancorp shareholders bombarded the company’s chairman and chief executive officer with questions Wednesday, contending Alan Levan did not publicly express his true concerns about the quality of bank loans hurt by the real estate collapse.
During cross-examination by shareholder attorney Mark S. Arisohn, Levan repeatedly said he acknowledged his worries in quarterly reports and conference calls with stock analysts in 2007. His misgivings became a reality when the housing meltdown triggered loan defaults that sent the company’s stock plummeting.
Shareholders in the securities fraud class action led by the State-Boston Retirement System claim company executives identified problem loans before the downturn but didn’t warn them soon enough.
Arisohn, a partner with Labaton Sucharow in New York, combed through call transcripts and financial reports, questioning Levan about the Fort Lauderdale-based company’s bank subsidiary.
But while Arisohn highlighted phrases in reports that he said were proof Levan misled investors, the banker maintained his concerns were evident if the reports and calls were taken in their entirety.
Pointing to the language in one quarterly report, Arisohn asked, “That certainly doesn’t say BankAtlantic is going to have problems with its land portfolio, does it?”
“You can’t just pick out one sentence,” Levan responded.
The plaintiff attorney, who seeks to prove Levan hid the gravity of sinking bank finances from shareholders, contended Levan used softer language when addressing the public. One example was a Levan e-mail to fellow executives stating, “I believe we are in for a long, sustained problem in this sector.”
Arisohn accused Levan of not conveying the same tone with analysts.
Levan testified Tuesday that he regularly offered balanced accounts, pairing positive statements with concerns.
Jurors were shown a transcript of an April 26, 2007, conference call with analysts in which Levan said, “When we know something, we — you can count on us to report it and highlight it for you.”
Arisohn said company executives rang no warning bells in the next two months when several developer project loans were downgraded in value.
Shareholders claim the holding company hid problem loans and misled them into thinking the publicly traded company was healthier than it was heading into the recession. The stock, which once hovered around the $70 mark, has been trading below $1 since early September.
BankAtlantic insists it behaved conservatively as a lender, properly made all disclosures and should not be required to pay shareholders anything for their stock losses.
“Our price decline came from our disclosures,” Levan said Wednesday.
Shareholders are unfairly attacking the bank for appropriate disclosures, according to defense attorney Eugene Stearns of Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami.
Shareholders note the bank kept an internal watch list of substandard loans but did not show it in public filings.
“As the market started to deteriorate, we started to watch these loans,” Levan said.
While the company had concerns about some loans because of an initial slowdown in late 2006, it didn’t think the bank would take significant losses because the loans were properly underwritten.
“We said, as forcefully as we could, we were concerned about the market, concerned about the portfolio,” Levan said. “My job is to have this theoretical crystal ball. Sometimes I’m right; sometimes I’m wrong.”
On the stand, Levan said his worries about land loans to builders was dead on.
His testimony ended Wednesday, and closing arguments are scheduled for Tuesday.