Wilmington Trust Corp., which was forced to sell itself after its stock plunged 90%, made so many bad loans that employees' retirement accounts lost value, according to a lawsuit.
The Wilmington, Del.-based bank approved risky loans for what it called beach homes that were actually a 45-minute drive from the ocean and set among chicken farms, Delaware resident Julie Gray said in her lawsuit. The suit seeks to represent everyone who participated in the Wilmington Trust Co. Thrift Savings Plan. The plan was tied to the company's stock price.
“The company's myriad problems in its real estate-related lending business were so widespread and serious that the very survival of the company was at risk,” according to the complaint filed Jan. 31 in U.S. District Court in Wilmington.
The plan participants lost about $25 million, Edwin Mills, their attorney, said in a telephone interview.
Megen Morris, a Wilmington Trust spokeswoman, didn't immediately return a call for comment.
The suit names current and former Wilmington Trust executives, including former CEO Ted T. Cecala.
The 401(k) plan had $160 million in assets as of Dec. 31, 2008, according to its latest Form 5500 filing.
Facing regulatory pressure because of mounting losses on construction loans, Wilmington Trust agreed on Oct. 31 to sell itself to M&T Bank for $351 million, or $3.84 a share, about half the price on the previous trading day. Founded by members of the du Pont family in 1903, the bank has reported six straight quarterly losses.