Item 1.01. Entry into a Material Definitive Agreement.
On December 31, 2022, Trustmark National Bank ("Trustmark") agreed to a
settlement in principle (the "Settlement") relating to litigation involving the
Stanford Financial Group that includes a lawsuit initially filed in the District
Court of Harris County, Texas on August 23, 2009 and also includes other
subsequently-filed Stanford-related lawsuits. Trustmark Corporation, the parent
company of Trustmark, has provided disclosure relating to these matters in its
periodic reports on Forms 10-K and 10-Q throughout the pendency of these
actions.
The parties to the Settlement are, on the one hand, (i) Ralph S. Janvey, solely
in his capacity as the court-appointed receiver (the "Receiver") for the
Stanford Receivership Estate; (ii) the Official Stanford Investors Committee;
(iii) each of the plaintiffs in the Rotstain and Smith Actions (as defined
below); and, on the other hand, (iv) Trustmark.
Under the terms of the Settlement, the parties have agreed to settle and dismiss
Rotstain et al. v. Trustmark National Bank, et al., CA No. 4-22-CV-00800 (S.D.
Tex.) (the "Rotstain Action"), Smith et al. v. Independent Bank, et al., CA No.
4-20-CV-00675 (S.D. Tex.) (the "Smith Action"), and all current or future claims
arising from or related to Stanford. In addition, the Settlement provides that
the parties will request dismissal of Jackson, et al., v. Cox, et al., CA No.
3:10-CV-0328 (N.D. Tex.) (the "Jackson Action" and, collectively with the
Rotstain Action and the Smith Action, the "Actions") pursuant to the terms of
the bar orders described below. If the Settlement, including the bar orders
described below, is approved by the Court and is not subject to further appeal,
Trustmark will make a one-time cash payment of $100 million to the Receiver.
Trustmark expects to be relieved of pre-trial deadlines and the February 27,
2023 trial setting in the Rotstain Action pending final Court approval of a
Settlement Agreement reflecting the terms of the Settlement and pending entry of
the bar orders. The Smith and Jackson Actions are currently stayed.
The Settlement includes the parties' agreement to seek the Northern District of
Texas District Court's entry of bar orders prohibiting any continued or future
claims against Trustmark and its related parties relating to Stanford, whether
asserted to date or not. The bar orders therefore would prohibit all litigation
relating to Stanford described in Trustmark Corporation's SEC periodic reports,
including not only the Actions and any pending matters but also any actions that
may be brought in the future. Final Court approval of these bar orders is a
condition of the Settlement.
The Settlement is also subject to the execution and delivery of a definitive
Settlement Agreement reflecting the terms of the Settlement, notice to
Stanford's investor claimants and final, non-appealable approval by the U.S.
District Court for the Northern District of Texas. The timing of any final
decision by the Court is subject to the discretion of the Court and any appeal.
While Trustmark believes that the Settlement is consistent with the terms of
prior Stanford-related settlements that have been approved by the Court and were
not successfully appealed, it is possible that the Court may decide not to
approve the Settlement Agreement or that the Fifth Circuit Court of Appeals
could decide to accept an appeal thereof.
The Settlement Agreement will provide that Trustmark makes no admission of
liability or wrongdoing in connection with any Stanford matter. As has been the
case throughout the pendency of the Actions, Trustmark expressly denies any
liability or wrongdoing with respect to any matter alleged in regard of the
multi-billion-dollar Ponzi scheme operated by Stanford for almost 20 years.
Trustmark's relationship with Stanford consisted of ordinary banking services
provided to business deposit customers.
Trustmark and Trustmark Corporation have determined that it is in the best
interest of Trustmark, Trustmark Corporation and the shareholders of Trustmark
Corporation to enter into the Settlement to eliminate the risk, ongoing expense,
uncertainty as to ultimate outcome and imposition on management and the business
of Trustmark of further litigation of the Actions and related Stanford claims.
As a result of the entry into the Settlement, Trustmark Corporation recognized a
$100 million litigation settlement expense included in non-interest expense
related to the Stanford litigation during the fourth quarter of 2022. Trustmark
Corporation expects that the Settlement will be tax deductible. Trustmark will
remain substantially above levels considered to be well-capitalized under all
relevant standards.
The foregoing description of the Settlement Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Settlement Agreement, a copy of which will be filed as an exhibit to a future
periodic or current report of Trustmark Corporation.
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