Ronald M. Gates
Wolcott Rivers Gates
Partner and shareholder
Education / Certifications:
BA, Duke University
JD, cum laude, Washington and Lee University School of Law
Naval Justice School (with distinction)
Virginia Business Magazine – Virginia’s “Legal Elite” for Business Law; Virginia Super Lawyer Magazine and Richmond Magazine as a “Virginia Super Lawyer”; AV Peer Review Rating by Lexis Nexis Martindale-Hubbell.
What is the field or practice area for which you are best known?
Mergers and acquisitions.
Please describe a signature case, deal or transaction.
Congress enacted what was known as a Minority Capital Assistance Program a number of years ago. It was designed to help minorities get started in business. I formed a corporation (“Minority Corp.”) owned by people who qualified as minorities. The business objective was to form a federal bank and to bid on assets of a local bank that had been taken over by Resolution Trust Corporation.
Funding for the new bank involved $12 million in cash from a group in Pennsylvania that invested in banks. Minority Corp. applied to the federal government for a $3 million loan under the Minority Capital Assistance Program. The loan, which was non-recourse, was approved and the plan was to take the $3 million loan and contribute it to the new bank to be formed, which would result in 20% ownership with 80% owned by the Pennsylvania group that contributed $12 million to the new bank.
The new bank had to be approved by several federal regulators including the Federal Reserve and FDIC. The FDIC regional office denied approval stating that Minority Corp. had “no skin in the game” (i.e., that no owner put any real money in Minority Corp.). I appealed that decision to the FDIC in Washington D.C. stating that the $3 million loan, once contributed to the new bank, was “capital” even though the same was a non-recourse loan and that to deny approval would make the Minority Capital Assistance Program a fraud. The FDIC approved the new bank, and it was formed.
The new bank bid against other existing local banks for assets of the failed bank and won the bid. We then negotiated for $60 million in mortgage loans from the federal government. The value was based on all loans having a top rating (i.e., no problems like missing documents, e.g., deeds of trust, in the files, etc.). Since many included loans that were not top rated, we negotiated a price of $49 million. After opening the new bank, we hired a company to locate the missing documents in the included loans. We believed we could cure most defects. We were successful, so we ended up with $60 million in value for which the new bank paid $49 million, resulting in the bank having an $11 million additional value, which was also a source of income.
A couple years later we did a reverse merger into a larger but publicly owned bank that was about to be taken over by RTC. The reverse merger gave that bank equity, and the owners of our bank took over control in that bank. That bank was later sold to a large out-of-state regional bank, and all owners of the bank we formed made significant profits, including the owners of Minority Corp. which owned 20% but contributed only the $3 million non-recourse loan.
Please briefly mention up to three additional important cases, deals or transactions.
I represented a mortgage company with two owners. Owner A was CEO of the mortgage company, but owned under 50%. Owner B, Bank 1, held controlling ownership. CEO of the mortgage company wanted to be able to control the mortgage company. We were able to find two new banks which bought out Bank 1 and we were able to obtain voting control for the CEO of the mortgage company even though Bank 1 owned over 51% of the economic interest. The process also involved obtaining consent of three state regulators, one of which ruled against consent. We were able to get that state to reverse its position and approve the transaction.
I represented a franchisee that over a period of years bought other franchisees around the country until it reached 40% of all the franchisor’s franchisees. Once reaching that size, my client had significant leverage, and, notwithstanding a reluctant franchisor, my client bought the entire franchise. This made my client’s business much more valuable, and my client subsequently sold its business, which was the ultimate plan for several years.
Describe your approach to working with clients.
Every client, regardless of the size of the matter, is entitled to my full attention, time, respect, professionalism and desire for the best outcome possible. I try to listen carefully, keep them informed regularly and always take their calls unless in a meeting or on a telephone or Zoom conference, in which case I will call back the same day. My objective is to show from my actions, not just my words, that I care about them and a successful result of the matter entrusted to me. My career has been built on long term relationships with clients.
What is the best career advice you’ve received?
Regardless of the area of law or the size of the matter, communicate with your client on a regular basis, which includes returning phone calls promptly. Over the long term, no marketing plan will yield better results in building a successful practice.
What developments in business law do you expect to see in 2021?
The Commonwealth of Virginia has, over many years, been considered a business-friendly state. On July 1, 2020, several new laws were enacted in Virginia that significantly increased employer liability to employees including, but not limited to, employment discrimination, noncompetition agreements, wage and hour laws and worker classification. I anticipate that in 2021 there may be even more such laws continuing to increase liability for business owners.