- The Washington Times - Tuesday, March 11, 2003

Capital One Financial Corp. gave advance notice to some of its lenders and advisers that its chief financial officer planned to resign amid an insider-trading probe.
The McLean consumer-credit company said in a prepared statement yesterday that it had discussions with some of its "lenders under its corporate credit facility, advisers, rating agencies and regulators shortly before the public announcement" last week of the probe and the resignation of finance chief David Willey.
In the March 3 announcement, Capital One said Mr. Willey resigned after receiving notice that Securities and Exchange Commission staff planned to recommend that the securities agency file a lawsuit claiming that Mr. Willey "traded in the company's stock while in possession of material nonpublic information."
The day the announcement was made, Capital One's stock fell $2.72 a share, or 8.8 percent, to close at $28.25 a share on the New York Stock Exchange. It fell further yesterday, down 44 cents to $27.04.
Capital One said that its advance discussions with its lenders and others, some of whom the company said were holders of its asset-backed securities, were "subject to confidentiality obligations."
"The discussions complied with the laws concerning fair disclosure and no investor was disadvantaged in any way," the company said.
News of the advance meeting was first reported yesterday by the Wall Street Journal, which said the briefing was held the weekend before the public announcement.
Capital One said the notice to Mr. Willey stemmed from an investigation that came in the wake of the company's disclosure last July that it was raising its loan-loss reserves to comply with concerns raised by federal banking regulators. That announcement sparked a one-day plunge in the company's stock price from $50.60 to $30.48 a share.
Last summer's announcement and stock loss prompted a flurry of shareholder lawsuits claiming the company violated securities laws by not disclosing regulators' concerns earlier. Those lawsuits have been consolidated into a single class-action case in U.S. District Court for the Eastern District of Virginia in Alexandria.
Fred Taylor Isquith, a partner with the New York law firm Wolf Haldenstein Adler Freeman & Herz who represents the lead client in the class-action lawsuit, said he would be "bringing this new information formally to the attention of the court."
Mr. Isquith said it was troubling that the company received notice last August that the SEC was investigating Mr. Willey's trading of its stock, but did not disclose that investigation until last week's announcement, except to the bond investors at the meeting the previous weekend.
"Apparently, Capital One thought it was sufficiently material to inform selected investors," he commented.
In its latest statement, Capital One said it "believes that its disclosures concerning this matter were handled appropriately and in compliance with all applicable securities laws and regulations."

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