Ex-shareholders of now-defunct First Asian Bank get another chance to overturn takeover

Some former shareholders of the now-defunct First Asian Bank will get another chance to overturn its 2011 takeover by Royal Business Bank.

At a Thursday hearing, Clark County District Judge Mark Denton ruled that the shareholders could file an amended complaint after dismissing the earlier version in July for technical reasons. Denton allowed the rewritten version to proceed even though John Bailey, the attorney for the bank and several former directors, promised another attempt to dismiss the case outright in a month.

Craig Marquiz, the attorney representing 28 former shareholders, has contended that they were badly shortchanged in the deal in large part because certain insider loans were written off or absolved just prior to closing while other loans were classified as nonperforming. This had the effect, he wrote in court papers, of worsening First Asian’s financial position and lowering the price Royal Business Bank had to pay.

The shareholders owned from 960 to 50,000 shares each, collectively coming to 277,000 shares or 20.5 percent of the total.

To date, the bank has not argued the substantive side of the case. But at the time, top bank officials depicted Royal Business Bank as the last and best alternative for First Asian, which had incurred losses from its opening and was moving closer to outright failure.

The legal argument to date has centered on how the shareholders are legally positioned. The case began in January as a derivative action, where shareholders claim to act on behalf of the entire company, but Denton ruled that it was not a valid course for this situation. Direct claims for damages the shareholders say they personally suffered will now go ahead.

To try to be made whole, Marquiz will try force Royal Business Bank, based in Los Angeles, to divest First Asian and re-establish it as an independent bank.

First Asian was launched in 2007 to cater to the Asian-American business community centered on Spring Mountain Road, but it quickly ran into trouble. The next year, state and federal regulators cited turmoil in the top ranks and weak governance as major flaws with the bank’s operation and pressed for improvements.

A new CEO and board members came on board in 2009, then started to look for fresh capital to shore up a deteriorating balance sheet. This culminated in the Royal Business Bank purchase for $49,400 on July 8, 2011, at a time the bank listed $17.3 million in loans and $28 million in deposits, according to court papers.

In the three years prior to the Royal Business Bank sale, Marquiz said First Asian received offers for as much as $8 million, but none went ahead. As recently as October 2010, a financial adviser had calculated the First Asian’s book value at $2.10 a share; the shareholders actually received 3.7 cents a share from Royal Business Bank.

Contact reporter Tim O’Reiley at toreiley@reviewjournal.com or at 702-387-5290.