Retired executive calls for sale of Carolina First
By John Temple Ligon Temple@TheColumbiaStar.com
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Friday, January 11, John McMullen, the retired president and CEO of the Tampa market of Florida Banks Inc., called for the sale of Greenville- based South Financial Group, parent company of Carolina First Bank.

The South Financial Group is also the parent company of Florida Banks Inc. South Financial bought Florida Banks in 2004 and merged it into its Florida subsidiary, Mercantile Bank.

McMullen, in a January 8 letter to South Financial's board of directors, said because the bank's management hasn't met stated goals and objectives, "it is time to evaluate strategic alternatives," as

quoted in the Tampa Bay

Business Journal.

South Financial CFO James Gordon responded by saying the company remains committed to enhancing shareholder value through its long- term strategic plan.

Over the past year, a share of South Financial Group stock hit a high of $27.47 and recently a low of $12.63. By press time, January 14, the last trade was recorded at $13.39, down by about half the year's peak value.

South Financial CEO Mack Whittle owns 571,728 shares of the company.

However, in two spinoffs at Carolina First, Whittle did especially well. Both spinoffs, Affinity Technology Group and NetBank, did poorly. NetBank liquidated last November, and Affinity appears to be down to its last $100,000 in operating funds, having spent over $70 million.

In early 1996, the board at Carolina First agreed to award Whittle and two other Carolina First executives some of Carolina First's stock in Affinity Technology Group.

Whittle directed his bank's money, seed capital, to Affinity in its startup phase, and for that Carolina First gained 20 percent of Affinity's stock.

At its peak value soon after the initial public offering in the spring of 1996, Affinity shares were selling for $24.25 each. Whittle and his two fellow Carolina First executives were given 666,634 shares of Carolina First's Affinity stock as a reward for using the bank's money to grow Affinity and guide the company into an initial public offering.

Whittle's choice for Affinity CEO, Jeff Norris, held 40 percent of Affinity stock upon the initial public offering, but Norris, like Carolina First, held restricted shares, stock that couldn't be sold upon the initial public offering or at peak value later.

Whittle and his two fellow Carolina First executives held unrestricted shares but never disclosed when they sold their shares or for how much.

Even when there was a shareholder lawsuit at Carolina First, the timing and the amount of stock sales never came out. The shareholders failed in their lawsuit.

Carolina First held its remaining shares in Affinity, and the bank's 4,454,190 Affinity shares have fallen from $24.50 in 1996 to about a nickel in the past year. At press time, January 14, Affinity shares sold for $0.14 each.

The other Carolina First spinoff, NetBank, held its initial public offering in mid- 1997, a year after Affinity's. Carolina First originally held 20 percent of NetBank, but that was reduced to less than 10 percent by the time of the initial public offering.

Carolina First could not sell its NetBank shares until three years after the initial public offering, which was the end of July 2000.

The full record of Whittle's number of shares, values and sales is uncertain, but Whittle was able to sell his shares earlier than Carolina First was allowed, and in June 2000 he sold 150,000 shares of NetBank for about $2 million.