Sacked Republic Bank CEO Vernon Hill II and his wife Shirley Hill have been accused of self-dealing in their mismanagement of an employee retirement program, according to a federal lawsuit filed Tuesday.
The U.S. Labor Department alleges from 2016-2020 the Hills invested assets from a profit-sharing plan for employees of Shirley Hill’s Moorestown-based design firm InterArch Inc. in corporations which Vernon Hill had ties.
Shirley Hill “heavily relied” on Vernon Hill’s investment advice regarding the plan, so much so that he effectively had control over the assets, per the suit filed in the U.S. District Court for the District of New Jersey.
Through this advice, he invested the assets in ways that would benefit them both personally, the suit alleges.
By failing to diversify the plan’s assets, they engaged in prohibited transactions that enriched themselves, according to the suit.
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At one point, the Hills invested nearly 70% of the plan’s assets in the stock of the London-based Metro Bank, which Vernon Hill cofounded in 2010 and was chairman of until 2019. They also invested at least 13% of the assets in shares of Republic First Bancorp Inc., the bank’s parent firm. At Republic First, Vernon Hill served in various leadership roles from 2008 until last month, the suit says.
Even as the share prices of both Metro Bank and Republic First fluctuated significantly, the Hills did not rebalance the plan’s assets. In fact, they acquired more Metro Bank shares and held onto Republic First stock until the plan was terminated in the summer of 2020, according to the suit.
In March 2017, the suit says, the Hills transferred 15,000 of the plan’s Metro Bank shares, worth about $600,000 at the time, to Shirley Hill as part of her required minimum distribution for the year.
By the end of February 2018, 69.7% of the plan was invested in Metro Bank, having a market value of $18.6 million. Metro Bank’s stock price peaked in March 2018 and then dropped from $57.13 to $4.47 a share. Despite acquiring more shares over the next couple months, Metro Bank shares made up about 41% of the plan’s assets by July 2019 due to a decline in value, according to the suit.
Then, over two days in June 2020, the Hills sold all of the plan’s Metro Bank shares for $731,470 — or 96% less than the shares were worth at peak value, according to the suit.
Vernon Hill joined Republic First in a consulting role in 2008, according to Securities and Exchange Commission filings. Two years later, he and Shirley purchased 500,000 Republic Bank shares for the plan, worth about $1.2 million at the time, per the suit.
In January 2016, the Republic First shares made up a third of the plan’s portfolio. Vernon Hill became chairman of the board at the end of that year. As of the middle of 2017, Republic Bank shares made up 17.5% of the plan’s assets, with a market value over $4.6 million, according to the suit.
From 2017 to 2020, Republic First’s share price declined from $9.75 to $2.05. Despite this steady decline, the Hills did not sell any shares. The shares, worth $1.2 million — or 74% less than peak value — were transferred out of the plan in August 2020, a few weeks after the plan was terminated.
Vernon Hill also served as the CEO of Republic First from 2019 until he was ousted this July. His forced departure in August marked the culmination of a months-long clash for control of the company. During the squabble, his successor for both chairman and CEO, Harry Madonna, accused Vernon Hill of unrelated self-dealing also involving Republic First and his wife’s design firm. These claims have yet to be proven.
This article originally appeared on Cherry Hill Courier-Post: Ex-Republic Bank CEO, wife faces employee retirement federal lawsuit