TAM Shareholder Michael Hutchinson obtained a defense verdict for his bank director clients after a five-day jury trial in the District Court for the City and County of Denver.
Plaintiff Harvey Sender was the court-appointed receiver for the estate of Mark H. Yost. As receiver, Sender held Yost’s controlling shareholder interest in FBHC Holding Company, which in turn owned all of the shares of Flatirons Bank. Yost was also, prior to August 2010, the president of Flatirons Bank.
In August of 2010, the bank discovered that Yost had embezzled roughly $4 million by taking out fraudulent loans in the names of childhood friends. Yost used the embezzled funds to support his failing Ponzi scheme. The embezzlement rendered the holding company insolvent, and caused the holding company’s largest creditor (holding all the bank shares as collateral) to declare a default.
Mr. Hutchinson’s client/Defendants, the board of directors of the holding company, negotiated reductions in the holding company’s debt and also authorized the issuance of additional stock in order to recapitalize the holding company, to avoid foreclosure and rescue FBHC. The recapitalization diluted Yost’s roughly twenty percent interest in FBHC to less than one percent. As receiver, Sender brought claims of breach of fiduciary duty and unjust enrichment against the board, primarily on the theory that he had not been permitted to participate in the recapitalization in order to preserve Yost’s undiluted interest. Defendants denied any liability and asserted they acted in good faith. The fiduciary duty claim was tried to the jury; the unjust enrichment claim was later decided by the court.
After trial, Judge Martin Egelhoff also ruled in the Defendants’ favor on the one remaining equitable claim, resulting in a clean sweep defense verdict. Mr. Hutchinson’s clients were awarded their costs. The case is Harvey Sender, as Receiver of the Estate of Mark H. Yost, v. O. Jay Tomson et al., District Court, City and County of Denver, State of Colorado, Case No. 2011CV5150.