Commerce Bank founder and head forced out

Posted: June 29, 2007

In a stunning move linked to a federal investigation, Vernon W. Hill II is leaving Commerce Bancorp Inc., which he founded more than 30 years ago and built into a $47 billion bank that helped change the face of retail banking.

The Cherry Hill bank said today that Hill, 61, would immediately depart from its main operating subsidiary and would retire as chairman, president and chief executive of Commerce Bancorp on July 31.

Commerce stock climbed on the news, as investors placed bets that the company will be sold. Shares closed up $3.18, or 9.4 percent, to $36.99 on the New York Stock Exchange.

An investigation by federal banking regulators into transactions between the bank and a real estate firm partly owned by Hill and an architectural design firm owned by his wife, Shirley Hill, dogged Commerce this year.

From 1996 through 2006, Commerce made $11.62 million in lease payments to real estate firms affiliated with Hill and $59.23 million to Shirley Hill's InterArch Inc., of Mount Laurel.

"These related party transactions have become a distraction to our regulators, shareholders, customers, and employees," said Douglas J. Pauls, Commerce's executive vice president and chief financial officer during a conference call with Wall Street analysts.

Pauls is one of three members of a new office of the chairman at Commerce Bank N.A., which is the operating subsidiary of Commerce Bancorp. The office also includes Dennis M. DiFlorio, who was promoted to chairman. The third member is Robert D. Falese Jr., who was promoted to president and chief executive.

Commerce Bank N.A. said it had signed a consent order with the Office of the Comptroller of the Currency, while Commerce Bancorp has entered into a memorandum of understanding with the Federal Reserve Bank of Philadelphia.

The overarching goal of these agreements is to end insider real-estate and other transactions. They require the board to form a real-estate review committee. The bank has not yet decided whether that committee will review existing leases with Vernon Hill's real estate company or whether the bank will hire an outside party to do that.


Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.

 


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