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Prodromos v. Everen Securities

June 26, 2003

JOHN PRODROMOS, PLAINTIFF-APPELLANT,
v.
EVEREN SECURITIES, INC., PRINCIPAL FINANCIAL SECURITIES INC., AND DANIEL WESTROPE, DEFENDANTS-APPELLEES, AND DENNIS KLAESER, *FN1 DEFENDANT.



Appeal from the Circuit Court of Cook County. No. 98 L 8534 Honorable Mary A. Mulhern, Judge Presiding.

The opinion of the court was delivered by: Justice Hartman

UNPUBLISHED

Plaintiff, John Prodromos, filed a four count first amended complaint against defendants, Everen Securities, Inc. (Everen), Principal Financial Securities, Inc. (Principal), Daniel Westrope, and Dennis Klaeser, alleging breach of fiduciary duty and fraud in connection with defendants' alleged usurpation of plaintiff's proposed purchase of Home Federal Savings Bank (Home Bank). The circuit court granted summary judgment in favor of defendants on count I (breach of fiduciary duty) and counts II and IV (fraud) of the first amended complaint, from which plaintiff appeals.

Principal was a securities brokerage firm that had both a retail sales and an investment banking branch. In January 1998, Principal merged with Everen. Westrope was employed by Everen as an investment banker from June 1995 until February 1998. Plaintiff was a retail brokerage client of Everen.

Prior to January 1998, plaintiff wanted to acquire and take over operation of Home Bank, which plan he communicated to Steven Golber, his retail broker at Everen. Golber set up a January 1998 meeting with plaintiff and Westrope, at which plaintiff explained his ideas regarding Home Bank. Westrope agreed to call institutional shareholders of Home Bank stock to see if they would vote their proxies in favor of plaintiff. Westrope did not know about Home Bank prior to this meeting. In February 1998, Westrope left Everen and began working at State Financial Services Corporation (State Financial). In June 1998, State Financial acquired Home Bank and Westrope was named regional president of the newly acquired bank. In June 1998, Everen was engaged by State Financial to write the fairness opinion on Home Bank.

Based on these facts, plaintiff filed his first amended complaint. Count I alleged breach of fiduciary duty against Westrope and Everen. Count II alleged fraud against Westrope and count IV alleged that Everen was vicariously liable for that fraud. *fn2

Golber testified by deposition that, at plaintiff's request, he provided plaintiff with public information regarding Home Bank in 1997. He bought Home Bank stock in order to secure the bank's annual reports and other financial information. Golber also helped plaintiff purchase Home Bank stock. Plaintiff explained his ideas about acquiring and taking over operation of Home Bank. Golber set up the January 1998 meeting with plaintiff and Westrope at which plaintiff explained his ideas regarding Home Bank. Westrope suggested contacting institutional shareholders to see if they would vote their proxies in favor of plaintiff and agreed to make those phone calls. No engagement letter was signed at the meeting and there was no discussion of fees. Golber called Janus Funds, one of the institutional investors, and was told that they had sold their position in Home Bank.

After learning that Westrope had left Everen, Golber set up a meeting in early March 1998 with plaintiff and Klaeser, an investment banker at Everen. At the meeting, plaintiff explained his ideas regarding Home Bank. Klaeser told plaintiff that Everen could not help him because Everen did not do hostile takeovers.

In June 1998, Golber learned that State Financial had acquired Home Bank. Golber contacted Robert Ollech who told him that the State Financial/Home Bank deal was Westrope's deal. Golber called plaintiff and informed him of the State Financial/Home Bank deal and Ollech's comments regarding Westrope. Golber admitted that he did not do any investigation into what role, if any, Westrope or Everen played in the State Financial/Home Bank deal.

Plaintiff testified by deposition that he discussed his Home Bank idea with Golber in late 1997 or January 1998. At the January 1998 meeting with Golber and Westrope, Westrope agreed to contact institutional investors to see whether they would back their voting power for plaintiff and whether anyone would want to buy stock in Home Bank because of new management. There was no discussion of a formal engagement letter at the meeting. According to plaintiff, Westrope said that the fees would depend on what he had to do. Westrope indicated that Everen might want to invest in the deal. Plaintiff stated that there was never a more specific discussion of fees because "we never got to the point of what they were going to do." Plaintiff contacted Westrope several times following the meeting, but never discussed an engagement letter or fees. Westrope informed plaintiff that one mutual fund already had sold its Home Bank stock and that he had contacted two others and was waiting for responses.

In March 1998, Golber informed plaintiff that Westrope had left Everen. Plaintiff met with Golber and Klaeser. During that meeting, plaintiff told Klaeser that they needed enough votes to get two people on the board of Home Bank, whether it took buying stock or mutual fund backing. According to plaintiff, Klaeser was "extremely rude" and said we do not do anything like this. After this meeting, plaintiff contacted Dean Witter and Merrill Lynch in New York. Both requested that he come to New York to present his idea. Plaintiff refused. Plaintiff met with George Moser, who owned three banks, regarding his desire to take over operation of Home Bank. Moser testified by deposition that plaintiff had put together an investor group to acquire Home Bank and asked if he wanted to participate. Moser agreed to participate, but the amount of his investment was never formalized.

At some point after the March 1998 meeting, plaintiff contacted Banco Popular regarding the Home Bank deal, but halted discussions when Banco Popular requested more specific information. After learning of the State Financial/Home Bank deal, plaintiff discussed his ideas regarding Home Bank with Saul Binder at Success Bank. According to plaintiff, Binder offered him 2.5% of the acquisition price as a commission if Success Bank acquired Home Bank. Binder sent a letter to plaintiff expressing Success Bank's interest in the Home Bank deal. Plaintiff presented that letter to Home Bank. Plaintiff received a letter from Home Bank indicating that they were not interested in the Success Bank deal.

Plaintiff testified by deposition that he had no information that Everen provided investment banking service to State Financial in its takeover of Home Bank. Plaintiff further stated that he had no factual basis for his allegation that Westrope used plaintiff's confidential information to get a position at State Financial.

Daniel Westrope testified by deposition that he met with plaintiff and Golber in January 1998. At the meeting, plaintiff discussed his ideas regarding Home Bank. Prior to the meeting, Westrope did not know about Home Bank and he did no research on it following the meeting. Westrope offered to call institutional shareholders of Home Bank as an accommodation to a client of the firm. Westrope's intention in making the calls was to try ...


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