Shareholders bitter after decades of trust

10/01/2008 12:00 AM

10/01/2008 12:25 AM

Bill Poston bought his first shares of what is now Wachovia more than 40 years ago, when he worked as a management trainee at a bank in Virginia. Over time, he accumulated a lot of stock, which he hoped to rely on in retirement.

But the bank's rapid fall has rendered his holdings near-worthless – and now, he wants answers.

“If a man is telling you one week a bank is solvent, and less than a week later the FDIC is expediting a sale of the bank's assets, there's something wrong here,” said Poston, 69. “Somebody is misleading the shareholders.”

In several days that have seen shares of Wachovia fall from $10 to around $1 before recovering to close at $3.50 Tuesday, investors are questioning the company's leadership. They're questioning the government. They're questioning a deal in which Citigroup would buy the bulk of the bank's operations for $2.2 billion in stock, leaving shareholders with a stake in only the much smaller Wachovia that would remain.

In towns up and down the eastern seaboard – in North Carolina, Pennsylvania, Virginia, in states where Wachovia and its predecessors snapped up small banks for decades – they're also reflecting on their own judgment, looking back over generations of stock ownership with sadness and regret.

Large institutional investors such as pension and mutual funds control 73 percent of Wachovia's stock, and they stand to lose the most in absolute dollars if it falters. However, Wachovia stock generally makes up a sliver of such firms' overall holdings.

For many individual investors – whether by virtue of having worked for the company, or just believing in it – it means far more.

Poston, a Richmond, Va., resident and retired executive vice president of a bank Wachovia later bought, said he invested for the long term and was proud of his company. In return, the stock served him well, paying a reliable dividend.

In hindsight, he said, many things bothered him about the bank's health in recent years, but former CEO Ken Thompson's assurances that it would be fine lulled him into a false sense of security.

“I own Wachovia stock, my three children own Wachovia stock, my five grandchildren own Wachovia stock, and they've all lost everything because of (company management),” said Poston, who declined to specify how many shares he owned, but said he has taken significant hits to his net worth and income.

“They have lied, that's the only way I can say it.

“I'd like to know what the future is,” he said. “I'm hopeful there might still be some value for us, but I really have to say – am I going to live long enough to see it? I'm trying not to be bitter, but I'm afraid I'm rather bitter.”

Tom Rice's Wachovia shares have been in his family since the 1930s, when his grandfather, a revered patriarch, bought 15 shares in the Bank of Yanceyville (N.C.). Upon his death, he willed three shares to each of his five children; when Rice's mother died, she passed her shares on to Tom, a Valdese resident, and his sister.

They consider the shares a family heirloom and still plan to pass them on to their own children. But what they're bequeathing remains to be seen: Two years ago, Rice said, their 5,500 shares were worth $330,000 and producing dividends; Tuesday, they were worth about $19,250.

“The desecration of Wachovia, for me, has also been the desecration of the legacy of my dead ancestors,” he said. “I felt I could trust the leadership in Charlotte to do the right thing and examine acquisitions like Golden West and ask the right questions and demand the right answers.”

Retired legal secretary Carolyn Haag's 4,200 Wachovia shares had been in her husband's family since the 1940s, with roots in a small Pennsylvania bank.

But the 66-year old Beaumont, Texas, resident sold them Tuesday afternoon for $3.40 a share, at an estimated $150,000 loss, after realizing current shareholders would not receive Citi stock.

The only time she and her husband ever voted against the recommendations of the company's board of directors was on the Golden West deal in 2006, and she questions their judgment to this day.

“I was flabbergasted by the mismanagement,” she said. “They totally misled everyone … there was absolutely no warning.”

Richard Delello, 64, a retired Wachovia technology employee from suburban Philadelphia, said he believed the company could have bounced back under Bob Steel, but ran out of time.

Now, he said, he's holding onto his 3,200 shares – because he feels like he's lost so much already, he doesn't have much else to lose by doing so. He plans to vote against the Citi deal, saying he believes shareholders can get a better deal, despite the potential losses Wachovia faces due to bad loans.

“How this all came to an end is a very, very sad state of affairs,” he said.

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