Legal battles swirl around a Minnetonka bank's leader

Friends and associates describe Steven Liefschultz as a hard-driving businessman, the kind of boss who expects a lot and speaks his mind.

Some of the people who have worked for the Minnetonka banker and real estate investor see an office tyrant, alleging in a half-dozen lawsuits that Liefschultz subjected them to tirades, name-calling, graphic sexual comments and violent threats.

Liefschultz, the 64-year-old CEO and chairman of Equity Bank in Minnetonka, has brought his own suit denying all the allegations, as a bitter battle erupts in Hennepin County District Court. He argues that he's the victim of an orchestrated campaign to publicly embarrass him and force him into settlements.

"I am very disappointed that these individuals have created such malicious and false allegations against Equity Bank and me, and in the negative distractions they are causing -- not only for me, my family and our livelihoods -- but also for an institution that has a proud 75-year history of serving Minnesota businesses," Liefschultz said in a written statement.

The open legal fighting started in early 2011 when David Grzan, a former president of Equity Bank, sued Liefschultz, accusing him of repeated threats to kill him, dismember his children and burn down his house. The dispute settled privately in June.

Since then additional former workers have sued Liefschultz and his companies. The five include two women who worked at other companies Liefschultz controls, including Remada Co., a real estate firm named in some of the lawsuits, and three people who worked at Equity Bank, including two former presidents. The claims in the five lawsuits vary but include allegations of sexual harassment, infliction of emotional distress, negligent supervision and battery.

The lawsuits describe episodes over roughly the past decade in which Liefschultz variously threw shoes and a stapler, screamed until he turned red and foamed at the mouth, and hurled insults and threats. According to one complaint, he lowered his trousers, without underwear, in front of a female worker, and yelled until a bank examiner cried.

In one lawsuit, dated Feb. 27, former Equity Bank President Jon Pettengill accuses Liefschultz of arranging a fire that destroyed Pettengill's Medicine Lake home in 2006. He's seeking $2 million.

Liefschultz, who lives on Lake Minnetonka, declined to be interviewed but said in his statement that he and the other directors of Equity Bank "vigorously deny and will defend against these scandalous allegations in their entirety."

Lawyers for Liefschultz have filed motions to dismiss, or intent to dismiss, the first four suits on various legal grounds. One of the motions, for instance, characterizes Liefschultz's behavior as "rude or ill-advised" but not enough to meet the standard for intentionally inflicting emotional distress. The motions are pending.

As for the arson accusation, Liefschultz last month sued Pettengill and unnamed co-conspirators. Liefschultz had "no involvement in causing Pettengill's home to burn," his complaint said.

Liefschultz describes Pettengill in the complaint as untrustworthy and "a disastrous hire" who didn't bring in loans. He claims Pettengill's financial pressures were so great that he may have burned down his own house, and has reason to try to extort money.

Equity Bank's independent directors, Tom Kane and Paul Sween, said in a statement that they interviewed everyone at the bank after Grzan sued Liefschultz last spring, including one of the new plaintiffs. "NO issues or corroboration or concern were raised," they said.

Eck, in an interview, denied any conspiracy. "If Liefschultz has anybody to blame, it's himself. All we really want to do is speak the truth and let that decide everything."

A small bank

With $53 million in assets and typically around 10 employees, Equity Bank is among the state's smaller banks. It focuses on business and real estate loans. According to financial reports filed with regulators, it's on sound footing, with profits last year of $180,000.

Patrick Pariseau, the bank's president for less than six months in 2007, alleges in his lawsuit that the bank's finances were "far from stable" when he worked there.

Pariseau, 54, of Shoreview, accuses Liefschultz in his lawsuit of illegal transactions such as disguising or temporarily eliminating problematic loans and transactions just before reports to regulators were due.

The lawsuit also describes threats. "On multiple occasions," according to the pleadings, "Liefschultz asked Mr. Pariseau what would he do if he found out someone had killed one of his children."

The bank's independent directors deny any wrongdoing. They say Equity Bank has had routine bank exams every 18 months and hasn't been penalized: "No improprieties as alleged have ever been found by independent counsel."

The crop of new lawsuits against Liefschultz includes three filed by women over allegedly abusive behavior.

One, Kristin Wagner, 31, of Minnetonka, said in her complaint that Liefschultz was open about his "hatred and disdain for women." He allegedly called her such things as "bitch" and "imbecile" and made sexual overtures, according to her complaint, such as suggesting she come to his house to "slip on a cheerleader outfit."

His tirades were particularly intimidating, according to her complaint, because he frequently talked about violence, threatening to burn down houses, for instance, and hire people to "break legs."

Some others who have worked with Liefschultz say the allegations surprise them. Gloria Torrence, 57, of Woodbury, said she's worked on and off for Liefschultz's real estate ventures since 2002 and that Liefschultz was "always business."

"I have great respect for him," Torrence said. "The man is professional, and that's one of the reasons I came back to work for him. I've never had any problems."

Mary Bujold, president of real estate research firm Maxfield Research in Minneapolis, said she's worked with Liefschultz for more than a decade. She described him as a serious businessman who "doesn't pull any punches with you."

"In all of my dealings with Steve he was always very polite, courteous, very businesslike," Bujold said. "It doesn't seem to add up to me."

Jon Pettengill was Equity Bank's president from 2002 until early 2006, when he resigned over conflicts with Liefschultz. About a month later, while Pettengill and his family were in Florida, a neighbor called to tell him his house was on fire, according to Pettengill's lawsuit against Liefschultz.

The house was destroyed.

Pettengill's lawsuit says that investigators asked Pettengill who might want to harm him, and Pettengill said only Liefschultz, who was angry over his resignation. Investigators interviewed Liefschultz, who was also out of town during the fire. Liefschultz's lawsuit against Pettengill says he had nothing to do with the fire.

The investigative report from the State Fire Marshal, obtained by the Star Tribune, shows the cause of the Pettengill fire was arson -- someone poured gasoline in the living room and out the front door. The Pettengills were cleared as suspects, according to a separate investigative report on the fire from the Hennepin County Sheriff's Office, but no viable suspect was identified.