Eagle Bancorp, Inc.
- Company Name
- Eagle Bancorp, Inc.
- Stock Symbol
- Class Period
- March 2, 2015 to July 17, 2019
- Motion Deadline
- September 22, 2019
- Southern District of New York
The complaint charges Eagle Bancorp and certain of its current and former officers with violations of the Securities Exchange Act of 1934. Eagle Bancorp operates as the bank holding company for EagleBank, Inc. (“EagleBank”), which provides commercial and consumer banking services primarily in the United States.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and operations. Specifically, defendants failed to disclose that Eagle Bancorp had made over $180 million in loans to finance the private ventures of the Company’s CEO and Executive Chairman, Ronald D. Paul (“Paul”), and had extended preferential loans to several members of Eagle Bancorp’s board of directors. As a result of this information being withheld from the market, Eagle Bancorp securities traded at artificially inflated prices during the Class Period, with its stock price reaching a high of more than $69 per share.
On December 1, 2017, market research firm Aurelius Value published a report accusing the Company’s then-CEO and certain members of its board of directors of using the Company “as their own private piggy bank.” The report alleged an “insider loan scheme” involving numerous instances in which the CEO arranged business loans on favorable terms from Eagle Bancorp in exchange for cheap equity stakes in the borrowers for the Ronald D. Paul Companies (“RDP”), an entity named for and controlled by the CEO and which owns a portfolio of real estate properties and other operating companies. The report further alleged that the Company had made over $180 million in undisclosed loans to finance RDP’s real estate investments, as well as hundreds of millions of dollars in additional loans to other borrowers in which RDP holds a financial stake.
When the Aurelius Value report was first published, the Company vigorously denied the allegations, calling the report “deceptive and materially misleading” and accusing its authors of a scheme to manipulate the market for Eagle Bancorp stock on behalf of short sellers. In the immediate aftermath of the report’s publication, the Company experienced a stock price decline of approximately 25%. Nevertheless, because of the Company’s multiple public reassurances, the stock price recovered much of this loss and the stock continued to trade at artificially inflated levels.
On March 21, 2019, Eagle Bancorp announced that Paul would be retiring “effective immediately,” but cited health concerns as the reason for the sudden departure. Soon thereafter, the Company also announced “strategic changes” to its board structure in order to improve the Company’s governance practices.
Then on July 17, 2019, Eagle Bancorp disclosed rising legal costs stemming from ongoing internal and government investigations of “the Company’s identification, classification and disclosure of related party transactions; the retirement of certain former officers and directors; and the relationship of the Company and certain of its former officers and directors with a local public official.” On this news, Eagle Bancorp’s stock price fell $14.30 per share, or more than 26%, to close at $39.15 per share on July 18, 2019.