A Philadelphia-area law firm has filed a class action lawsuit against Orrstown Bank, its holding company and board members, alleging they defrauded shareholders by misrepresenting the quality of the bank's loan portfolio and lending practices.
Orrstown made “false and misleading statements” in the registration statement and prospectus for its March 24, 2010, common stock offering, said the complaint filed by Haverford-based Chimicles & Tikellis. The firm describes itself on its website as a “leading national class action law firm” that has recovered billions of dollars for its clients.
The suit alleges that Orrstown continued to mislead investors about its loan portfolio and risk management until October 2011. That month, the bank announced $9.4 million in charge-offs and the Federal Reserve of Philadelphia, one of Orrstown’s regulators, refused to authorize a dividend payment.
Orrstown’s stock price swiftly dropped, “indicating that the defendants’ false assurances caused Orrstown to trade at artificially high prices” until then, Chimicles & Tikellis said in a statement.
The suit accuses Orrstown of violating the federal securities law and seeks compensation for anyone who bought Orrstown shares between March 24, 2010, and Oct. 27, 2011. It names the Southeastern Pennsylvania Transportation Authority, or SEPTA, the Philadelphia area’s public transportation authority, as lead plaintiff.
Calls to Orrstown seeking comment were not immediately returned.
“We are not satisfied with our results and know you deserve better,” bank President Thomas Quinn wrote shareholders in the bank’s annual report.