Capital One Financial Corp. agreed to settle a lawsuit against BankUnited Inc. (BKU) Chairman and Chief Executive Officer John Kanas and Vice Chairman John Bohlsen in return for $20 million.
The deal bars the two men and BankUnited, the lender backed by Blackstone Group LP and billionaire Wilbur Ross, from opening a branch in New York, New Jersey or Connecticut or soliciting Capital One customers until Jan. 31, according to the settlement filed today in federal court in Alexandria, Virginia. BankUnited also must operate Herald National Bank, the lender it agreed to buy last year, as a separate entity until the end of January.
“Kanas and Bohlsen denied liability and made no admission of wrongdoing,” both lenders said in a statement. “BankUnited said the provisions in the settlement agreement will not have any material financial impact on the company or any material effect on its strategic plans in the tri-state area.”
The settlement ends a dispute triggered last June when Miami Lakes, Florida-based BankUnited agreed to purchase Herald National to enter the New York market. Capital One, led by CEO Richard Fairbank, alleged a month later that Kanas and Bohlsen breached non-compete agreements signed in 2007. BankUnited, which wasn’t a party to the suit, joined the settlement. It must be approved by U.S. District Judge Liam O’Grady.
Kanas and Bohlsen worked at Capital One following its purchase of North Fork Bancorporation, the Melville, New York- based lender that Kanas ran for about 20 years and where Bohlsen served as vice chairman. Capital One, based in McLean, Virginia, completed the deal for about $13.6 billion in December 2006.
The men left less than a year later under a separation agreement that barred them from competing against Capital One for five years, according to a May 17 court ruling that denied their request to void the pact. In return, restricted shares awarded to Kanas and Bohlsen, valued at $24 million and $18 million, respectively, vested immediately, the filing shows.
“Capital One was pleased with the decision of the federal court, which affirmed the validity of the non-competition agreements that were negotiated in good faith,” Tatiana Stead, a Capital One spokeswoman, said in a phone interview. “We are also pleased with the terms of the settlement.”
The original non-compete contracts were set to expire in August, according to the filing.
Capital One climbed 1.7 percent to $55.05 in New York trading and has surged 30 percent this year, compared with a 15 percent advance for the 24-company KBW Bank Index. BankUnited rose 41 cents to $23.80 and has gained 8.2 percent in 2012.
Kanas, 65, told investors when he took BankUnited public in January 2011 that he was seeking a New York expansion. BankUnited, with $12.2 billion in assets, has more than 80 branches in Florida. Herald National owns three branches in New York: in Manhattan, Brooklyn and Melville.
Capital One’s main bank unit has 287 branches in New York, 66 in New Jersey and one in Connecticut, according to Federal Deposit Insurance Corp. data.
Herald National must operate separately from BankUnited’s primary banking unit, and Kanas and Bohlsen may not serve in management or as directors until a new non-compete agreement ends in January, according to the statement.
BankUnited paid Kanas about $4.9 million over the two years ending Dec. 31 and he accrued about $37 million in compensation in 2009, including $35.8 million in stock awards, according to a filing. He owned about 3.7 million shares, or 3.9 percent of BankUnited, as of Dec. 22, data compiled by Bloomberg show.
Kanas and a group of private-equity investors including Carlyle Group LP and Blackstone bought BankUnited, a collapsed Florida lender, in 2009, pumping in $900 million of capital and entering into a loss-sharing agreement with the FDIC.
The case is Capital One Financial Corp. (COF) v. Kanas, 1:11-cv- 750, U.S. District Court, Eastern District of Virginia (Alexandria).