By Jeff McKinney
The Cincinnati Enquirer

The lawyer for shareholders who sued Provident Bank and two of its top executives alleging securities fraud said Wednesday that they will appeal a federal judge's dismissal of key claims in the suit.

Rick Wayne of the Cincinnati law firm Strauss & Troy said the shareholders will continue to pursue remaining claims and appeal the dismissal.

On March 9, U.S. District Judge S. Arthur Spiegel granted Provident Financial Group's motion to dismiss fraud claims by some investors who said they were misled and their stock value was hurt when the banking company restated profits.

In March 2003, Provident reported it had overstated earnings by $70 million from 1997 through 2002 when it improperly accounted for nine bundles of auto-lease transactions. The Cincinnati-based bank restated profits for those six years.

The investors in the class-action suit claimed securities fraud occurred because Provident deliberately misstated financial results. They argued the misstatement resulted in an overstatement of profits, causing the stock to be artificially inflated.

The plaintiffs claimed, based on the scope and time period of the errors, that Provident Financial Group, Provident president and CEO Robert Hoverson, and Provident executive vice president and CFO Chris Carey were aware of or were reckless in not knowing about the accounting errors.

But Spiegel's ruling said the court did not find facts supporting an inference of fraud or cover-up of the accounting error.

"Rather, the court finds facts supporting the view that defendants discovered their error and came clean about it," Spiegel wrote.

Provident's stock tumbled 20 percent the day after the accounting errors were reported.

Shares at Provident, which agreed in February to be bought by Cleveland's National City Corp. for $2.1 billion, were 89 percent higher this week than a year ago.

The remaining claims in the shareholder lawsuit involve Provident Financial Group and Hoverson and Carey.

E-mail jmckinney@enquirer.com