Cases & Investigations
State Bancorp, Inc. Derivative Litigation

On July 16, 2007, Wolf Popper filed a lawsuit in New York Supreme Court, Nassau County derivatively and for the benefit of State Bancorp, Inc. (State Bank) against certain current and former officers and directors of State Bank. The Complaint in the action alleged that State Bank’s current and former officers and directors knew of and caused State Bank to assist in a fraud perpetrated by Island Mortgage Network, Inc. As a result of those officers’ and directors’ claimed breaches of fiduciary duty, State Bank allegedly lost significant sums of money in litigating and settling the lawsuits brought by those injured by the Island Mortgage fraud. The Complaint further alleged that the then-Board of Directors had failed to discipline, fire, or demote any of the officers and directors directly responsible for the damages to State Bank. Instead, those officers and directors had been rewarded with bonuses, promotions, and/or generous retirement packages. By Order dated April 3, 2008, the Court denied defendants’ motions to dismiss.
 
On August 5, 2008, the Court approved a settlement of the litigation. The settlement provided for (i) significant corporate governance reforms at State Bank; (ii) substantial changes to the composition of the Company’s Board of Directors (the Board was reduced from 15 to 10 members and 3 of the 10 would be “new” directors in that they came onto the Board after the commencement of the action); and (iii) the payment of $1.2 million in cash to State Bank from its insurance carriers.