Wilson, others on board paid $2.65M in suit

The congressional candidate calls himself a hero. The attorney for the shareholders agreed.
By DAVID SKOLNICK
VINDICATOR POLITICS WRITER
To settle a civil lawsuit accusing him and 10 other directors at the former Belmont National Bank of negligence and breach of fiduciary duties, Charlie Wilson, a Democratic write-in candidate in the 6th Congressional District, paid $700,000 to the bank's stockholders.
The March 2002 settlement called for the 11 directors to pay $2.65 million in total to numerous bank stockholders, with Wilson and two other then-directors agreeing to pay whatever the eight others couldn't pay. Wilson, of St. Clairsville, a multimillionaire, said he and the two others paid more because they had more personal wealth than the others.
At issue were more than $5 million in loans given to Schwartz Homes, a New Philadelphia company, to build homes -- that were never constructed -- for about 300 families and the culpability of the bank's directors, including Wilson. The bank also lent millions of dollars to hopeful homeowners.
Wilson's explanation
Wilson describes himself as a hero because if he and the others didn't settle the case, the bank would have gone out of business. Because of the scandal and the lawsuits, the bank was paying legal fees and its stock value decreased, Wilson said.
Ed Patru, a National Republican Congressional Committee spokesman, said Wilson's failure to live up to his fiduciary responsibility resulted in the loss of money and homes for many people.
Bob Fitzsimmons, the Warwood, W.Va., attorney who represented the shareholders in the lawsuit, sees both sides.
"There was no active negligent acts by the board, but they were overseeing the bank, so it's ultimately their responsibility," he said. "But if they didn't step up, I don't know if the bank would have survived."
Fitzsimmons said he has a "great deal of respect" for Wilson, whom he called "very honorable." But the attorney said the directors failed to monitor the bank executives, who encouraged the board to approve the loans, and didn't seek liens on the properties as terms of the money given to Schwartz Homes.
Schwartz did a lot of business with the bank, Wilson said.
In the lawsuit settlement, the stockholders also received $3 million from Progressive Casualty Insurance Co., the bank's insurance company, and $4 million from S.R. Snodgrass, an accounting firm that was supposed to audit the bank's finances.
What happened
Between 1996 and 1999, the bank loaned more than $5 million to Schwartz Homes, a modular and mobile home business, to build houses for hundreds of people, according to lawsuits. Schwartz didn't provide most of the homes, the suits say.
Wilson said he and the other directors were duped by the bank's then-chief operating officer, who devised a scheme with Schwartz Homes to not only obtain the $5 million, but also to steer prospective homeowners to borrow money from the bank to pay for the nonexistent homes.
Wilson said he and the other directors approved all the loans, but it was based on false information from the bank's COO, who was fired.
To settle five lawsuits filed against the bank, its parent company and other subsidiaries, and its 11 directors, the directors agreed to the $2.65 million settlement.
Wilson said the directors settled the three-year-old lawsuits to save the bank. The bank had paid close to $2 million in legal fees to defend itself and its stock price dropped dramatically because of the lawsuit, he said.
With all of the financial activity because of Schwartz, Belmont's stock jumped to about $30 a share at the time, Wilson said. When a bank employee notified the board about the scheme and it became public, Wilson said the stock dropped to about $2 a share.
Bank merger
Sky Financial Group acquired Belmont in June 2005, offering the bank's shareholders options of selling shares for $6.15 each, buying Sky stock at an exchange ratio of 0.219 shares of Sky for each share of Belmont or a combination. Belmont had $294 million in assets when it was sold.
At the time of the sale, Wilson owned 153,556 shares of Belmont, or 1.4 percent of its entire stock, according to documents filed with the U.S. Securities and Exchange Commission. Wilson said he took some cash and exchanged some of his Belmont stock for Sky, but doesn't know the amounts. Wilson's stock was worth close to $1 million at the time of the Sky sale, but he insisted he didn't make money on the sale.
"I'm proud of this and I'm interested to see how the [Republicans] spin this," Wilson said. "It's a sign of character and my leadership."
Wilson, a well-financed write-in running against two candidates on the May 2 Democratic primary ballot, said Republicans are trying to discredit him because they "are concerned about my candidacy."
The NRCC has run television commercials in the 12-county congressional district attacking Wilson's credibility, focusing on his time in the mid-1990s as a director of a waste authority that dumped raw sewage into the Ohio River.
"It isn't surprising Charlie Wilson is trying to dismiss his culpability in this because he did the same thing with his role in poisoning the Ohio River," Patru said.
As for Wilson's "hero" comment, Patru said, "It's a little like a drunk sea captain who steers a ship into an iceberg and wants to be seen as a hero because he dropped the life boats. Charlie Wilson didn't save a d--- thing. The settlement was against the directors and not the bank."
skolnick@vindy.com