Centennial Bank’s lawsuit against former Happy State Bank staffers marks the second time the Conway-based lender has gone to federal court seeking compensation for pillaged assets in the wake of an out-of-state acquisition.
The March 3 case in Texas is similar to the $22.8 billion-asset bank’s long-running lawsuit in Florida that came to a close last year. But the scale of the staff exodus, the alleged internal corporate espionage and the impact on Centennial is much bigger in Texas.
Centennial sued 17 former Happy staffers among more than 70 who left to join a competitor’s startup operation in the bank’s backyard. Centennial accuses those 17 of stealing confidential information and delivering a “bank in a box” for American State Bank to jump from its east Texas base into the Lubbock-Amarillo area market.
The alleged ringleader in the conspiracy, as outlined in the 119-page complaint filed in Lubbock, is Jerry “Bud” Holmes, a 10-year staffer at Happy and its former central-west regional president overseeing seven branches. That position is described as the second-highest in the bank’s Lubbock lending operation.
The flashpoint for Holmes occurred after learning of the merger compensation for other Happy executives detailed in a public securities filing dated Oct. 22, 2021. He was angered by the merger agreement, according to Centennial’s lawsuit.
“Shortly thereafter, Mr. Holmes met with a member of Happy Bank’s board of directors and complained about not receiving additional compensation for himself,” according to the complaint. “Happy Bank offered Mr. Holmes significant additional compensation after the merger was announced, but he was still unsatisfied. He then crafted a plan of revenge.”
The complaint doesn’t get into the details of what specific compensation drew the ire of Holmes nor what additional compensation he was offered.
One of the biggest pots of money mentioned in the merger agreement filing by Centennial’s parent company, Home BancShares Inc., totaled more than $8.6 million.
That cash tally was tied to retention bonus agreements with five top executives at Happy: Robert Gottlich, executive vice president and senior corporate banking officer, $3.5 million; Mikel Williamson, CEO, $3 million; Alberto Rios, executive vice president and chief operating officer, $1 million; Scott Lewis, executive vice president and senior lending officer, $850,000; and Eric Alexander, chief financial officer, $325,000.
All five executives joined Happy after Holmes did. Their tenures with the bank ranged from Williamson joining in 2013 to Rios in 2018.
Centennial’s numerous claims against Holmes and the others include breach of fiduciary duty, breach of contract and unfair competition.
Allegations detailed in the complaint encompass improperly copied, transferred, used, deleted and/or disclosed Happy confidential information as well as the deletion or omission of customer information from Happy’s systems.
Centennial’s forensic investigation to build its case entailed the review of emails, printer logs, video recordings from security cameras along with activity on internal networks and computer drives.
Centennial has since dismissed claims against one of the 17 original defendants: Isac Ovalle, a former credit analyst at Happy who joined the bank in 2021.
The bank’s lawsuit alleged that he accessed numerous documents related to a Happy customer who later moved $8 million in loans to American State Bank. Ovalle is among nine defendants who resigned from Happy on April 25, 2022, and began work the next day at American State Bank.
According to the complaint, Ovalle stole confidential information using his personal Google account, deleted Happy files and solicited Happy customers.
Johnny Allison, chairman, president and CEO of Home BancShares, described the circumstances surrounding the Happy staff exodus as unprofessional and unfortunate.
“I kind of take this stuff personally,” Allison told investment analysts during the company’s fourth-quarter earnings call on Jan. 19. “You probably didn’t know that, but I kind of take it personally, and I don’t give up.”
Centennial persevered through seven years of court action before collecting $15 million last year from a similar post-acquisition dispute in Florida.
That federal lawsuit against former Bay Cities Bank staffers followed the $104.5 million purchase of the Tampa lender on Oct. 1, 2015. Three months later, Centennial launched a case against Gregory Bryant, former president of Bay Cities Bank, and ServisFirst Bank of Birmingham, Alabama.
The list of defendants expanded to include three other Bay Cities bankers who resigned at year’s end 2015 and joined Bryant at ServisFirst’s new Tampa-area loan production office: Patrick Murrin, former chief risk officer and executive vice president; Gwynn Davey, market president for Hillsborough County; and Jonathan Zunz, vice president of commercial lending.
At the heart of the Bay Cities lawsuit as well as the Happy litigation is Centennial alleging damages caused by ex-staffers taking confidential in-formation on their way out the door to join a competitor.
In Florida, that information encompassed loan and deposit information for all of its customers within the Tampa Bay region as well as the books of business of all of its lenders, originators and sourcing officers.
Before the announced settlement nearly six months ago, Centennial landed a summary judgment for breach of fiduciary duty against Bryant, who is now CEO of ServisFirst’s west-central Florida operations. Recent court orders cleared the way for additional claims to advance to jury trial against the defendants.
That $15 million settlement was reached with ServisFirst Bank, which signed indemnification agreements with Bryant, Murrin and Davey. Both parties bore their own legal fees.
So far, the Texas litigation hasn’t drawn American State Bank into the courtroom fray. Chartered in Arp, Texas, the $1.1 billion-asset lender is owned by Steele Bancshares Inc., headquartered in nearby Tyler.
The type of corporate litigation associated with cases like Centennial Bank’s is becoming more common with the advancement of tech tools for uncovering details, noted Randy Dennis, president and CEO of Little Rock’s DD&F Consulting Group.
“It’s becoming more frequent because of the ability to track information,” said Dennis, a veteran bank consultant. “Anything you do with files, there are no secrets there.
“It all boils down to somebody violating agreements or somebody taking material they shouldn’t have.”