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CapStar to Fed: Force shareholder to 'immediately divest'

CapStar Financial Holdings Inc. is pushing back against Gaylon Lawrence's attempts to increase his stake in the Nashville, Tenn.-based company.

Lawrence is a bank investor with seats on several bank boards and management teams. In August, he reported a 6.2% interest in CapStar. In early October, the stake had risen to 9.2%. It was slightly over the 10% regulatory threshold by the middle of the same month.

CapStar sued, claiming that Lawrence had failed to give the mandated prior notice or secure the necessary regulatory approvals.

Jason West, an affiliate of Lawrence, told the Nashville Business Journal that the lawsuit was a surprise, but that the Lawrence Group has also applied to own more than 15% of CapStar. Now the bank is asking the Federal Reserve to force Lawrence to "immediately divest" all his "illegally acquired CapStar shares." It also wants a cease-and-desist order and civil monetary penalties against the investor.

In a letter to the regulator, CapStar's legal counsel wrote, "There is no question that Mr. Lawrence ... is in ongoing violation of the [Change in Bank Control Act]." It noted that Lawrence had previously attempted to acquire control of CapStar in 2016, having "tried to derail [its] IPO by making an unsolicited offer" and then, upon rejection, by approaching two shareholders for their aggregate 30% stake.

CapStar's counsel further claims that Lawrence's controlling interests in banks are "through a sham structure designed to evade the Bank Holding Company Act."