A group of former Happy State Bank staffers want to cut to the chase in their courtroom dispute with the Amarillo bank’s new proprietor: Conway’s Centennial Bank.
Their March 3 complaint in Lubbock federal court alludes to damning forensic information that Centennial says documents their alleged theft of confidential material as they left Happy to join a competitor.
The 16 defendants want to see the evidence now rather than later.
In addition to a dismissal, the defendants are seeking a court order to compel Centennial to disclose the core information tied to its claims.
In response to the allegations, the group portrayed Centennial’s 119-page complaint as a retaliatory strike against them for leaving Happy State Bank and taking customers to their new place of employment: American State Bank of Tyler, Texas.
The exodus of more than 70 staffers shortly followed the $962 million acquisition in April 2022 of Happy by Centennial’s parent company, Home BancShares Inc.
“Far from an indicium of nefarious conduct, the fact that many clients chose to follow them to a new bank is simply a testament to the power of long-term, personal relationships in the community,” noted the defendants’ May 1 response to the bank’s claims.
“The resulting lawsuit is nothing more than a vehicle for retribution brought by a jilted multi-billion-dollar business with unlimited resources.”
The honeymoon with American State Bank has proved to be short-lived for some of the Happy State alumni. The $1.2 billion-asset lender has downsized its Panhandle presence less than a year after opening in Amarillo, Plainview and Lubbock. More on that later.
According to defendant court filings, the alleged intent of Centennial’s lawsuit is “to ruin lives by weaponizing the judiciary” with serious allegations based on mere speculation.
Centennial alleged the defendants “secretly ransacked Happy Bank using unauthorized USB devices, personal email accounts and third-party Internet applications.”
According to Centennial’s complaint, the former Happy staffers used the stolen information to deliver a “bank in a box” to a new competitor in the Texas Panhandle.
Allegedly armed with ill-gotten client information, the staffers joined American State Bank to provide the east Texas lender with a running jump into the Lubbock-Amarillo area market.
Centennial allegedly found significant evidence the defendants planned and took overt actions to steal and/or delete Happy Bank’s confidential information, steal its customers and solicit away its employees before leaving to join American State Bank.
In their recent motion for special case management procedures, the defendants want to see the data reports, log files and system-related information, alleged evidence collected during Centennial’s $5 million forensic investigation.
According to court filings, Centennial is opposed to such pre-discovery disclosure.
The case has drawn eight Texas law firms fielding 19 attorneys from Dallas, Lubbock, Houston and Amarillo.
Also involved in the fray is PivotHound Communications, a Los Angeles public relations and communications firm specializing in crisis communications and litigation support. A PivotHound news release coincided with the defendants’ response to Centennial’s lawsuit.
Andrew Hicks, managing partner of the Houston law firm of Schiffer Hicks Johnson, said in the release the filing asks the court to make Centennial “show its hand” with hard facts to back its “vague claims.”
“Centennial has made a big point of saying how it has spent $5 million on a forensic investigation into the purported thefts and fraud,” Hicks said in the release. “Its original complaint is littered with more than three dozen references to ‘forensic evidence’ or ‘forensic data’ or ‘forensic analysis.’ But we have yet to hear of any concrete findings.
“Without a core of facts, this lawsuit is nothing more than a legal shell constructed with the specific purpose of exacting revenge against my clients by smearing their reputations and saddling them with tens of thousands of dollars in legal fees.”
Schiffer Hicks Johnson is representing a dozen of the defendants while the other four have separate legal counsel.
“We are a joint defense group attached to each other, and we have the same story to tell from different perspectives,” said Mark Torian at the Champion law firm in Dallas. “We’re united.”
Champion attorneys are representing Jerry “Bud” Holmes, a 10-year Happy staffer 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.
“He’s got 40 years of impeccable service in the banking business,” Torian said of Holmes. “His integrity has never been questioned.”
Centennial described Holmes as the alleged ringleader in a conspiracy to pillage Happy State Bank, a disgruntled executive who orchestrated a “plan of revenge” against the bank.
According to Torian, Holmes didn’t recruit any of the more than 70 Happy staffers who joined him at American State Bank.
“He didn’t solicit a single employee, not one,” Torian said. “He was humbled by the number of Happy State employees who sought him out after his departure and asked to follow him to American State Bank.
“That’s a testament to his leadership and integrity.”
Centennial Bank’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.
The financial fortunes at Centennial Bank and American State Bank have traveled different paths since the two lenders became Panhandle competitors last year.
Founded in 1911 as Arp State Bank and known as American State Bank since 2008, the lender has scaled down its operations in northwest Texas after opening full-service branches in Plainview and Lubbock on May 26 and Amarillo on June 9.
The Amarillo location is closed, and the other two locations are now loan production offices, according to the American State website.
Accompanying those changes, staffing at American State Bank during the first quarter fell from 250 to 213.
Despite the personnel cuts, salaries and employee benefits soared to more than $8.1 million for the three months ending March 31. The bank also reported a $1.2 million loss for the quarter, which followed a year-end loss of $6.7 million.
Mixed in with the shifting sands at American State Bank is a 2022 transaction with West Texas National Bank of Midland. The $1.9 billion-asset lender acquired a sizable chunk of American State’s Panhandle loan portfolio.
Coinciding with this deal is a migration of former Happy State-American State staffers to West Texas National.
While American State was enduring financial travails, the parent company of Centennial Bank recorded a 58% increase in first-quarter earnings from $64.9 million to $103 million.
The strong showing reflected a continued bounce-back for the $22.5 billion-asset Home BancShares from the post-Happy acquisition disruption.
After a second-quarter earnings tumble to less than $16 million last year, Home BancShares enjoyed record profits in the third and fourth quarters that propelled year-end net income to $305.3 million.