East West Lawsuit Claims First Union Did Not Fulfill Deal

East West Bancorp Inc. has sued First Union Corp., alleging the bank’s brokerage unit broke a promise to provide analyst coverage of East West’s shares in exchange for managing a $10-million securities offering.

East West claims an officer with First Union’s Wheat First Securities unit contacted the San Marino-based bank in October 1999 with a proposal to lead a preferred-securities offering. The First Union employee also said his company could provide national research analyst coverage of East West’s Nasdaq-traded shares, the suit said.

East West claims it hired First Union in July 2000 to arrange and manage the placement of about $10 million of preferred securities, paying First Union more than $300,000 in fees. First Union then failed to provide any research coverage of East West’s common stock after the deal closed, the suit said.

First Union “repeatedly and continuously engaged in a pattern of ongoing unlawful business practices, consisting of false promises and misrepresentations intended to induce plaintiff into entering various agreements,� the 24-page complaint said.

East West’s allegations include breach of contract, negligent misrepresentation and unfair competition. The lawsuit was filed Wednesday in Los Angeles County Superior Court.

East West is seeking at least $2 million in damages. The bank claims that accepting First Union’s offer to underwrite the securities in July 2000--instead of going ahead with the offering in March 2000 as planned--cost it more than $2 million in additional interest charges.

Charlotte, N.C.-based First Union hadn’t seen the suit and declined to comment, said spokesman Tony Mattera.

First Union provides commercial and retail banking and trust services as well as credit card, securities brokerage and investment advice services. It’s buying Wachovia Corp., which would create the second-largest bank in the Southeast, behind Bank of America, and the fourth-largest in the U.S.

East West Bank is a commercial bank with about 30 branches throughout California. It describes itself as focusing on the Chinese American community.

East West is covered by Sutro & Co., CIBC World Markets and Dain Rauscher Wessels, among others.

East West shares rose 5 cents to close at $25.92 on Nasdaq, while First Union shares rose 17 cents to close at $35.88 on the New York Stock Exchange.

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Banking Gains

East West shares have gained about 60% over the last year. East West, monthly

closes and lastest on Nasdaq Thursday: $25.92, up 5 cents

Source: Bloomberg News