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Crown Bank sues former CEO and two other bankers who left for rival Tradition

November 11, 2018

Crown Bancshares Inc. a family-run bank in Edina and Minneapolis with a history of dramatic clashes with wealthy clients and regulators is suing its most recent chief executive and two other bankers who jumped to a competitor three months ago.

The lawsuit, filed in September in Hennepin County District Court, seeks unspecified damages from the executives Kevin Howk, John Lindquist and Paul McGee as well as the bank that hired them, Tradition Bancshares Inc. of Bloomington.

Crown alleges that the three men used its facilities and equipment to seek employment with other banks and took confidential information, including customer lists and financial information, when they left in August. In the lawsuit, Crown said that Howk, the former CEO, talked to several banks about hiring the three bankers as a package deal and, in a conversation with one bank, said they could bring over $150 million in business from Crown Bank.

Tradition Capital Bank filed a motion to dismiss the suit. The bank and executives strongly deny the allegations and believe the case has no legal basis, said Jon Parritz, an attorney representing the bank. Dan Fagan, chief executive of Tradition, declined to comment on specifics of the case. He said the firm remains committed to providing exceptional service to our clients.

Executives at Crown did not return a request for comment. An attorney for Crown said the bank had nothing to say beyond its court filings.

In the lawsuit, Crown alleges the three executives violated their duty of loyalty by engaging in wrongful competitive activities while still working at Crown. It also accuses Howk of violating fiduciary duties to Crown. Crown is seeking financial damages but did not specify how much. The suit said an amount would be have to be determined at trial.

The executives departed shortly after Crown settled a lawsuit brought against it by some prominent customers who alleged that another former chief executive, Peter Dahl, defrauded them of $2.8 million in a series of false loans and deals.

That suit, brought in January, was settled in July without costs, fees or disbursements to any party, according to a court filing.

Howk became chief executive in June 2017 when Dahl resigned for reasons that were unspecified at the time. In late 2017, Dahl signed a consent order by federal regulators effectively barring him from the banking industry. The Federal Deposit Insurance Corp. said an investigation found reason to believe that Dahl engaged in unsound practices that brought him financial gain. Under the order, Dahl did not admit or deny any violations of law or allegations of wrongdoing.

Dahl, a son-in-law of Crown founder Thomas Healey, led the bank for years, including a four-year period that started in 2011 when it operated under a consent order from state and federal regulators to clean up troubled loans and increase reserves.

Since its start in 2000, the bank has aimed at serving high-net worth customers and brushed into scandal with some of them.

A decade ago, the bank, along with Dahl and Howk personally, became swept up in the bankruptcy of billionaire Tom Petters, the biggest case of business fraud in Minnesota history. Petters was a client of the bank when his fraud was uncovered in 2008. Over the next few years, the bank endured several investigations of its ties to Petters and clawback lawsuits from his creditors.

Crowns balance sheet and loan base have remained stable for the past five years. Its assets have ranged from $185 million to $234 million in that time, and were at $200.2 million at the end of September, the latest reporting period.

Evan Ramstad 612-673-4241

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