Employees of Sterling Financial Corp. (NASDAQ: STSA) filed a class-action lawsuit claiming the company improperly managed its employee retirement plans which were heavily invested in the company's devalued and risky stock. Sterling Financial allegedly failed to disclose the company was investing a majority of its pension funds in the company's stock that was backed by defaulting commercial real estate, construction and land loans. The lawsuit also charges the company deliberately misled employees and shareholders on the value of the stock and failed to secure adequate reserves against its credit portfolio.
As a result, Sterling stock traded at artificially inflated prices since July 23, 2008, reaching a high of $14.72 per share on Oct. 1, 2008, the lawsuit states. Today, the stock value sits below $1.00 per share. NASDAQ has already warned Sterling Financial that it has until June 7th to maintain its stock price above $1 per share for at least 10 business days, otherwise the Sterling stock could be delisted from the market. Additionally, Sterling Financial has entered into an agreement with the U.S. Federal Reserve to submit plans to strengthen its risk management and capital positions by March 2010.
The lawsuit claims Sterling Financial, a holding company for Sterling Savings Bank and Golf Savings Bank, violated the Employee Retirement Income Security Act of 1974 ("ERISA"). Employees eligible to join the class include those who owned stock in the Sterling retirement funds from July 23, 2008, to the present.