Suit alleges TARP bank retaliated against executive
A former executive of Citizens Republic Bancorp Inc., which got $300 million in public money through the Troubled Asset Relief Program, says he was fired after objecting to a multimillion-dollar payout sought by the company’s chairman and chief executive.
John D. Schwab, who was executive vice president and chief credit officer, said in a wrongul-termination suit that he was forced out after urging a member of the company’s board of directors to block Chairman William R. Hartman’s demands.
Schwab filed suit in a Michigan state court, alleging that Hartman retaliated against him for opposing the compensation plan. Schwab said in a press release announcing the suit that he had argued that any large bonus payment to Hartman would violate restrictions imposed on banks that take TARP money from the Treasury Department.
Citizens Republic declined to comment on the suit, citing a policy of not discussing pending litigation.
Hartman stepped down as Citizens Republic’s president and chief executive effective Jan. 31. However, he remains non-executive chairman of the board until the company’s annual meeting on May 27.
The proxy statement for the meeting shows that Hartman, who is 60, will get to take his pension payments under Citizens Republic’s supplemental benefits plan as a lump sum. The present value of those benefits were $6.88 million at the end of last year.
Citizens Republic noted that its obligations under the supplemental benefits plan are unfunded and are subject to its ability to make the payments when they are due. In other words, they are paid out of the company’s general accounts.
Citizens Republic is based in Flint, Mich., and has operations in Michigan, Ohio, Wisconsin and Iowa. It has been hit hard by the real estate slump and the auto industry’s troubles. It posted a $393.1 million loss for 2008, compared with a profit of $100.8 million in 2007. Nearly half of the red ink was attributable to the fourth quarter.
Hartman and Schwab both joined Citizens Republic in 2002. The company’s proxy statement shows that Hartman was paid $780,000 in salary last year and had total compensation of $1.87 million. Schwab received $295,000 in salary and $603,983 in total compensation.
In a press release announcing his wrongful termination suit, Schwab said he was approached in early December by board member Ben Laird, who told him that Hartman was seeking a guaranteed four-year contract and a $7.5 million “special bonus.” Schwab said he told Laird the payments were inappropriate.
Citizens Republic had already been approved for $300 million in TARP funds. It accepted the money on December 12, issuing preferred stock to the government in return.
According to Schwab’s account, the board rejected some of Hartman’s compensation demands. Schwab said that Hartman summoned him to a meeting on Jan. 29, two days before Hartman’s retirement took effect.
Hartman announced that Schwab also would be retiring, adding that Schwab had “undermined” him. Citizens Republic announced Schwab’s departure on Feb. 2.
Schwab, 64, said in the press release that he had no intention of retiring. He noted that he had been one of four candidates interviewed to succeed Hartman as chief executive and had said during that process that we was willing to work another three to five years.
We need more of these guys