Commercial Bank AP Photo.JPG File
Workers put the finishing touches to the facade of a new Commerce Bank branch in this photo from December 16, 2005. The bank’s parent company, which has since been taken over by TD Bank, is continued by founder Vernon Hill .
(AP archive photo)
A former New Jersey banking giant and the empire he built go head-to-head in a lawsuit that quietly opened this week in federal court in Camden.
In one corner is the parent company of Commerce Bank, once the Garden State’s largest and fastest growing bank.
In the other is Vernon Hill, the founder of Commerce whose customer-first philosophy upended the staid culture of bank branches and made him a wealthy banking superstar.
The lawsuit is over nearly $ 20 million that Hill says he owes following a 2007 layoff. He was fired after the bank settled a federal investigation into real estate transactions that allegedly benefited the family. by Hill.
The jury trial before Judge Robert Kugler concerns a lawsuit that Hill started five years ago. It should last several weeks.
Several notable names should be cited as witnesses. These include George Norcross, the South Jersey Democratic power broker, executive chairman of Conner Strong & Buckelew and former member of the board of Commerce. Defense lawyers want him to testify on the impact of the federal investigation on Commerce’s activities, according to a court file.
Joseph Buckelew, another former Commerce board member and founding member of the Conner Strong & Buckelew insurance agency, is also expected to also be called up. Senior TD Bank officials will also be called to the witness stand. The Canada-based lender acquired Commerce in March 2008 in a stock and cash transaction valued at approximately $ 8.5 billion.
Hill is also expected to testify, possibly today.
Owner of Burger King franchises, Hill started Commerce in 1973 with a single branch in Marlton.
Over the next 34 years, he built his banking business into a vast empire of more than 425 branches, 11,000 employees, $ 47 billion in assets and 2.4 million customers in the region.
The bank’s rapid expansion and sizable earnings endeared Hill to Wall Street investors and analysts, at least one of whom hailed him as the Michael Jordan of his field.
Crowd-loving tactics were part of Commerce’s growth: seven-day-a-week hours of operation, free coin counting machines in lobbies, and red lollipops helped attract customers. to its branches.
But Commerce’s rapid expansion by building brick-and-mortar branches also contributed to Hill’s downfall and the eventual sale of Commerce to TD, a US subsidiary of the Toronto-Dominion Bank of Canada.
In 2006 and 2007, investigators from the Office of the Comptroller of the Currency and the Federal Reserve sounded the alarm bells on real estate transactions to expand Commerce’s branch network in which Hill’s family members, including including his wife, would have taken advantage.
The OCC informed Commerce Bank in April 2007 that it would freeze approvals for new branches, lawyers for the bank’s holding company allege in a court case. Less than three months later, on June 28, 2007, the bank’s board of directors signed a consent order with the regulator over Hill’s alleged transactions. That same day, the board of directors unanimously voted to fire Hill.
Both parties agree that Hill was fired “without cause,” according to court documents.
Hill’s attorneys, who did not return a call for comment, argue it gives the former CEO the right to all of his compensation owed through 2010, plus interest, stock options and attorney fees. This represents just under $ 20 million, according to a court record.
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But lawyers for Commerce Bancorp, which still exists as a legal entity despite its takeover by TD Bank, contradict Hill’s claims by arguing that federal “golden parachute” rules limit his ability to make such a payment. , even though she was contractually obliged to do so. so.
The OCC consent order put Commerce in a difficult position. Under these circumstances, the bank would have to seek permission from regulators to pay Hill his severance package. But as part of that request, the bank would have to certify that it had no reason to believe Hill had committed fraud, breached his fiduciary duty, or abused his insider status.
The Commerce Department said it could not do this certification, particularly in light of a separate OCC consent order it entered into with Hill in November 2008. In this case, the regulator has said he found that Hill engaged in “dangerous and misguided practices” and breached his fiduciary duty. Hill signed the deal without admitting or denying the wrongdoing.
William Tambussi, a Brown & Connery lawyer who represents Commerce, did not return a call. A spokeswoman for TD Bank declined to comment.