BHL Financing LLC, a Benton County firm owned by billionaire Johnelle Hunt, sued Little Rock-based One Bank & Trust last week, claiming breach of contract and fraud.
The lawsuit was filed in Benton County Circuit Court.
The lawsuit claims that Layton Stuart, who was owner and chief executive officer of One Bank until forced out by federal regulators in 2012, gave BHL two promissory notes totaling $28.8 million in 2002 and 2007. To secure his obligations to BHL, Stuart executed a stock pledge agreement in 2002 that gave BHL a security interest in Stuart's stock in One Financial Corp., the parent company of One Bank, the lawsuit said.
Stuart died in 2013 at age 62.
The promissory notes were given to cover loans that J.B. Hunt, who owned BHL Financing before his death in 2006, made to Stuart. Johnelle Hunt is the widow of J.B. Hunt.
In 2009, One Financial and One Bank received $17.3 million from the U.S. Department of the Treasury under the Troubled Asset Relief Program.
For the bank to receive the $17.3 million, BHL, which held a first security interest in One Financial, had to sign a voting agreement with the government, the lawsuit said. To persuade BHL to sign the agreement, One Bank's executives told BHL that the bank was healthy, the lawsuit said.
"In truth, One Bank was in poor financial condition due to gross mismanagement by officers," the lawsuit said.
Jerry Pavlas, who was recruited to become One Bank's chief executive officer after Stuart was ousted, said he could not comment.
One Bank's book value was about $13 million in the second quarter, although it is uncertain if it could receive that much money in a sale.
But not everyone will receive money back if the bank were to be sold. Claims on One Bank total as much as $40 million.
BHL claims it is owed at least $15 million from a loan to Stuart and secured with stock.
The federal government lent One Financial $17.3 million in 2009. With the government's loan, BHL went from having interest in One Financial, which had $8 million in debt, to having interest in One Financial with more than $25 million in debt, according to the lawsuit.
StoneCastle Financial Corp., a New York firm that invests in community banks across the country, has invested $8 million in trust preferred securities in One Financial, said Joshua Siegel, StoneCastle's chief executive officer. StoneCastle invested the money in two installments, in 2004 and in 2006, Siegel said.
One Bank is now performing relatively well, said Siegel, who added that StoneCastle has investments in about 40 community banks in Arkansas.
"The boat's not sinking," Siegel said last month. "It has water in it but it's not sinking."
One Bank has an obligation to pay back the $8 million, with StoneCastle holding either the first or second claim if the bank were sold, Siegel said.
But StoneCastle doesn't necessarily want One Bank to sell, Siegel said.
"We'd love for them to get healthy and restore payments," Siegel said. "That would be our first choice. We have no impetus to want to get out."
In a settlement last month, proceeds of a life insurance policy on Stuart were used to pay the bank $6.9 million, pay the U.S. Treasury $4 million and pay Stuart's widow and adult children $4 million.
"It looks like the Hunts and the bank and the government are in a big fight," said Richard Torti, executor of Stuart's estate. "I think Mrs. Hunt has a good case."
Business on 11/11/2015