Just one year ago, Stephen Gordon was the kind of young investment banker financial institutions hired to figure out how they can make more money.
Today, seven months after he started his own hedge fund to invest in underperforming banks, bankers just want him to go away.
Mr. Gordon, who is 33, has developed a national reputation as one of the most aggressive shareholder activists. He is openly hostile to what he considers lazy management in some of his targets, and he is willing to force a sale if they blow him off.
In the short time since its founding, Genesis Financial Partners has bought significant stakes in four small northeastern thrifts and promptly laid out their problems - with detailed suggestions for improvement - in a barrage of correspondence.
Yet despite fervent resistance and growing enmity from management, one company, First Keystone Financial Inc., has yielded to Mr. Gordon's demands for cuts, and another, Central Cooperative Bank, has taken steps remarkably similar to his suggestions.
At the same time, the young activist has received some flak himself. The four institutions are accusing him of using confidential bank information, obtained from a previous investment banking job, to help Genesis.
"People can quarrel all they want about our style," said Mr. Gordon, wearing his usual attire - casual slacks and a button-down shirt, with no jacket or tie. "But without that external pressure, these institutions would continue underperforming. We have a positive impact."
That depends on the perspective. Management at Media, Pa.-based First Keystone, Abington (Mass.) Savings Bank, Lawrence (Mass.) Savings Bank, and Central Cooperative, in Somerville, Mass., say the fund does more harm than good. Mr. Gordon has criticized the four thrifts for poor earnings performance and unusually high expenses, calling for immediate corrective action and threatening to push for sales of the companies.
Officials of the four thrifts view Mr. Gordon - who declined to reveal much about his fund or its investors - as an upstart shareholder and manipulator of the media, out for a quick buck to cover borrowing costs, and not interested in the welfare of their banks or communities.
"He has his own personal agenda and I don't think he has the best interests of investors in mind," said William Morrissey, senior vice president at Central Cooperative. "He's a self-proclaimed expert from California telling three banks in the Boston area everything they're doing wrong."
Mr. Gordon's activities have affected other banks, too, even if Genesis doesn't have investments in them.
"It certainly has a lot of bankers looking over their shareholder lists to see if Genesis' name might appear," said James Moynihan, senior vice president at Advest Group in Boston. "I would say from a number of bankers that I have talked with that he would be an unwelcome shareholder."
The four thrifts point out that Mr. Gordon even met with the board of Abington last June 29 to try to develop a relationship between the thrift and his investment banking firm, Sandler O'Neill & Partners. That meeting occurred just one month before he started Genesis, which later invested in the thrift. And Mr. Gordon had previously sold bonds to Abington while with Sandler O'Neill.
Officials at the New York firm declined to comment about Mr. Gordon or Genesis.
But the comments and legal attacks on Mr. Gordon and Genesis only amaze the former bond salesman, who sees them as a smokescreen to avoid the truth.
"It's unbelievable. Respond to the substance. No one does," Mr. Gordon said firmly, hitting his fist lightly on the table to punctuate his statement.
"You better believe that we're out for shareholders and the community. We're trying to create more efficient institutions out there, more profitable companies. They can say whatever they want. There's not a lot of credibility behind it."
Mr. Gordon said he believes that fixing the problems at underperforming institutions is often just a matter of taking difficult but necessary steps to restructure the balance sheet and cut excessive costs, frequently the root cause of sagging earnings.
But small-bank executives are unwilling to make those decisions to enhance earnings, often because they require closing branches and firing workers.
That's where Genesis comes in. What the fund brings to the table, say Mr. Gordon and partner Brandt Johnson, a former Sandler O'Neill colleague, is their background and an eagerness to use it to prompt change - without charging an investment banker's prices.
"This is no different than what we did as investment bankers, only we're doing it from the shareholders' side of the table," Mr. Gordon said, calling himself an "investment banker in shareholders' clothing." "It's the same advice as an investment banker should give them."
Passive investors could own stock for years, but never see any benefits. And Mr. Gordon was determined not to fall into that trap.
"The unique part of the fund is the aggressive stance we take," Mr. Gordon said. "There are probably people who have the background to invest in the financial institutions, but they do it in a passive way."
Mr. Gordon's prominence at Genesis is a dramatic change for someone who never finished college and who left New York City last August for the sunny marinas of ritzy Newport Beach, Calif., just south of Los Angeles.
Since 1988, Mr. Gordon had worked at upstart Sandler O'Neill, eventually rising to managing director in 1991 and partner in 1992. While there, he specialized in advising managements on strategic planning, and suggesting ways to restructure their balance sheets and enhance earnings, the same work he's now doing at Genesis.
But since conflicts of interest prevented him or the firm from starting a hedge fund or having significant personal investments in the companies, he never felt that he could have much of an impact, he said. So, after formally establishing the fund in August, Mr. Gordon used $2 million of his own money to get things started, then solicited more money in the fall.
Besides Mr. Gordon and Mr. Johnson, Genesis' investors also include several individuals and banks, whom Mr. Gordon refuses to identify because the partners, particularly the banks, "don't want others to know" of their involvement.
