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Plaintiff to drop ex-Banc of California CEO from suit alleging fraudster ties

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Plaintiff to drop ex-Banc of California CEO from suit alleging fraudster ties

A plaintiff agreed to dismiss former Banc of California Inc. President and CEO Steven Sugarman with prejudice from a case involving allegedly misleading statements.

The Iron Workers Local No. 25 Pension Fund filed the class-action suit, accusing the Santa Ana, Calif.-based bank of not disclosing that its management had ties with convicted securities fraudster Jason Galanis, among other things. The misleading statements allegedly caused the stock's price to be artificially inflated, which then sharply fell when an anonymous blog in October 2016 alleged Galanis controlled COR Capital, the entity that recapitalized Banc of California. The blogger, only known by the pseudonym "Aurelius," accused various Banc of California executives of having ties with Galanis through off-balance sheet organizations.

The blogger also accused Galanis of having a long history of secretly plundering banks' assets, causing heavy losses to investors. Sugarman resigned in January 2017 over allegations he had ties with Galanis. Banc of California has also faced other lawsuits related to its allegedly misleading statements regarding ties with Galanis.

In agreeing to dismiss Sugarman from the suit, the plaintiff said it did not uncover proof that Galanis had any control on Sugarman's actions during his tenure in the bank nor in any of his business entities. Sugarman also entered into an agreement with Banc of California, requiring the bank to remove confidentiality designations on certain documents.