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Lawsuit 'dumbfounds' banker.

Union Planters Hones a Sharp-Edged Federal Case Against Jonesboro Millionaire's Business Dealings

A PROMINENT NORTHeast Arkansas businessman recently was sued in federal court amid allegations of breaching fiduciary duties, self-dealing, fraud and more in connection with the sale of a major bank holding company.

The lawsuit was filed against Wallace W. Fowler of Jonesboro and other unnamed individuals by the trustee of a bank profit-sharing plan now controlled by Union Planters Corp. of Memphis, Tenn.

The complaint stems from a series of transactions involving Mercantile Bancshares stock held by Mercantile Bank Profit-Sharing Retirement Plan. The 58-year-old Fowler, who was chairman and chief executive officer of Mercantile, is accused of manipulating a stock purchase that benefited him to the financial detriment of the profit-sharing plan.

The action comes just as Fowler is being mentioned for a position on the powerful Arkansas Highway Commission and is rapidly building another banking enterprise in northeast Arkansas.

The suit, filed through Kathleen Hillegas of the Little Rock law firm of McGlinchey Stafford Lang, asks for unspecified monetary damages.

Preliminary estimates place the starting point at $970,824, which represents Fowler's reported profit when he ultimately sold the profit-sharing stock to Union Planters in 1990.

Hillegas says the allegations only recently came to the attention of the trustees, who are unnamed executives with Union Planters.

Fowler says he is "dumbfounded" by the lawsuit.

"It's the first time I've ever been sued in my life," he says. "There was no wrongdoing by myself or any director or employee during the time this matter occurred. |The charges in the complaint~ are just not true.

"We have already started to vigorously defend the complaint, and I have no doubt we will prevail. People who know me know my business character."

And issues of character are at the heart of the sharp-edged lawsuit.

Fowler and the other unnamed defendants are accused of "numerous acts of dishonesty, negligence, misrepresentation, fraud, concealment and self-dealing."

Does the carpet-bombing tone of the complaint indicate the Union Planters-controlled trust is more interested in the publicity of a jury trial than a financial settlement?

"It's too early to comment on that," Hillegas says.

Merits of the case aside, the lawsuit could immediately impact Fowler's aspirations for a seat on the Highway Commission.

Fowler's name has cropped up in political circles in connection with a vacant slot on the commission. Rodney Slater of Jonesboro formally resigned as commission chairman June 3 following his U.S. Senate confirmation as director of the Federal Highway Administration.

Gov. Jim Guy Tucker will make his selection from a field of candidates from the 1st Congressional District.

"I haven't talked with the governor about it, but |my name~ has been mentioned," Fowler says.

Money-Maker

Fowler's big bankroll came in 1985, when he and his partners sold 92 KFC outlets scattered over a six-state region that generated $40 million in annual sales.

Scott Foods, a Canadian firm, bought all but 10 of the group's outlets for $37 million.

This provided a financial segue into banking that culminated in Fowler's 40 percent stake in a $36.1 million transaction.

Union Planters Corp. bought North Arkansas Bancshares, which had total assets of $422 million when the purchase closed on June 1, 1990. The six-bank holding company included Mercantile Bank in Jonesboro, First State Bank of Newport, Searcy County Bank in Marshall, The Bank of Rector, Mercantile Bank in Mammoth Spring (formerly Peoples National Bank) and Mercantile Bank in Hardy (formerly Security National Bank).

Fowler's return to banking began in September 1990, when Southwest Bancshares bought First National Bank of Poinsett County for about $2.14 million. He then purchased the Bank of Dover for $1.5 million in January 1992 and Bank of Caraway for $1.28 million in November 1992.

The three banks were renamed First State Bank of Arkansas in Trumann, First Bank of Arkansas in Russellville and First Bank of Arkansas in Jonesboro.

Fowler is nonplussed by the lawsuit and is focusing his energies on continuing the strong growth patterns of Southwest Bancshares.

"We're staying 100 percent busy," he says.

That has involved hiring three top executives from Mercantile National Bank -- two loan officers, Steve Alston and senior vice president Louis Intres, and Ed Way, senior vice president and marketing director. Harold Perrin, former president of Mercantile, is also aboard with Fowler.

Jim Stotts, agri loan officer from Citizens National Bank, and Bud Craft, an ex-loan officer from Citizens, also have joined Fowler's banking group.

"I've not gone after anyone, but there's been a lot of people who've applied for jobs with us," Fowler says.

Some believe the real fire behind the recent lawsuit is Fowler's aggressive reentry into the banking market under the shadow of lingering ill-will from sour business dealings with Union Planters.

These banking sources report that Union Planters executives had to write off more bad loans booked under Fowler's watch than they expected or were led to believe existed. The Tennessee bankers are wanting Fowler to pay, one way or another.

"I think |Union Planters is~ being vengeful," observes a veteran of the Jonesboro banking wars who requested his name not be used. "They've got a chance to make his life miserable, and TABULAR DATA OMITTED they're going after him. This is more about character issues than money."

The Alleged Story

At the center of the litigation are 13,017 shares (13 percent) of Mercantile Bancshares stock that was held by the profit-sharing plan.

The suit alleges that Fowler and other unnamed individuals put their own interests ahead of performing the fiduciary duties relating to the profit-sharing plan -- a breach of federal and state law.

The allegations recorded in the 20-page complaint read something like this:

* The profit-sharing plan committee was inactive from December 1986 until February 1988. During that time, Fowler took over as administrator of the profit-sharing plan.

* Under Fowler's direction, a meeting was held Dec. 31, 1987, with the 20 largest participants in the profit-sharing plan. The unstated purpose of the meeting was to arrange for Fowler to buy the stock for less than adequate consideration.

* On Feb. 17, 1988, the profit-sharing plan committee was resurrected to discuss an appraisal of the Mercantile bank stock.

* As a result, the committee voted to accept the valuation of $119.25 per share as proposed by Mercer Capital Management Inc. and to offer to sell the stock for $120 per share.

* Fowler stated his intention to maintain ownership in Mercantile Bank indefinitely and that regulatory problems existed with the profit-sharing plan owning the stock. Both assertions allegedly were false and were intended to mislead the committee, which was resurrected to conceal his activities behind a cloak of legitimacy.

* On March 6, 1988, Fowler purchased the shares directly or indirectly without allowing the stock to be offered for sale to other persons to see if it would draw a higher price. Fowler allegedly didn't disclose that he might sell his shares, which could yield a price far in excess of the appraised value.

* On June 1, 1989, the Fowler-led Mercantile Bancshares was merged into another Fowler-led bank holding company, North Arkansas Bancshares. A year later, Union Planters bought North Arkansas Bancshares for $36.1 million.

* As part of the deal, the former profit-sharing plan stock ended up netting a profit of $970,824 for Fowler. That value represented a per-share price of $194.58 for the profit-sharing plan instead of the $120 paid by Fowler.

A key question in all of this is whether Fowler knew about the likelihood of a pending sale to Union Planters and how much the deal might be worth.

At this point, the answer isn't known.

The Business World of Wallace W. Fowler

Holding company for three banks Southwest Bancshares, chairman (35.71 percent)

Management company for KFC and Taco Bell franchises Fowler Foods Inc. chairman (60 percent)

Taco Bell franchise

TB of Dyersburg Inc., stockholder (19 percent)

TB of Batesville Inc., stockholder (5 percent)

TB of Mountain Home Inc., stockholder (5 percent)

TB of Paragould Inc., stockholder (5 percent)

KFC franchises

Bauer Food Partnership, partner (49 percent)

Jackson Foods Inc., president (37 percent)

Jama Foods Inc., secretary (35 percent)

Southern Illinois Foods Inc., president (33 percent)

Potosi Foods Inc., president (33 percent)

Real estate

Fowler & Edmondson Partnership, partner (50 percent)

Southern Illinois Real Estate Partnership, partner (33 percent)

Fowler Family Investments, partner (20 percent)

TB Real Estate Partnership, partner (5 percent)

Insurance

Town & Country Insurance Agency Inc. -- Jonesboro, stockholder (30 percent)

Village Insurance Inc. -- Bella Vista, stockholder (30 percent)

Ouachita Life Insurance Co. -- Camden, chairman (12 percent)

Aircraft assets

Fowler & Creech Investments Inc., chairman (51 percent)

Poker Chip Aircraft Sales Inc., chairman (25 percent)
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Article Details
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Title Annotation:Wallace W. Fowler
Author:Waldon, George
Publication:Arkansas Business
Date:Jun 14, 1993
Words:1441
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