Glen Burnie Bancorp of Maryland has survived a hostile takeover attempt, but it is not taking any chances.
On Thursday, Glen Burnie's shareholders reelected the company's current board over a slate nominated by former director Susan Demyan Demianchik. The dissident group hoped to merge the bank with Baltimore's First Mariner Bancorp.
But Glen Burnie said it plans to proceed with a lawsuit against Ms. Demianchik and First Mariner. The suit, filed last Monday, claims that First Mariner funded the dissident candidates-First Mariner denies it-and that the fact was illegally omitted from their proxy filing.
It also claims that Edwin F. Hale Sr., First Mariner's chairman, and Ms. Demianchik are conspiring to illegally combine the two banks. First Mariner was trying to seize the board to take control of Glen Burnie, the suit contends, despite a Maryland law that bars a party that buys more than 10% of a company's stock from buying that company in the next five years.
"Ed Hale and Susan Demyan have been working together to disseminate false and misleading information," said F. William Kuethe Jr., president and chief executive officer of $226 million-asset Glen Burnie Bancorp. "Not only have they failed to fully disclose their intentions, but they are not acting in the best interest of the shareholders, and we are calling them on it."
Mr. Hale said the vote went as he expected and was "the first round of what is going to be a long-term fight."
He added that he is not worried about the lawsuit.
"I have been in proxy fights before," he said. "The very nature of it is that lawsuits go back and forth. But I think the lawsuit is baseless, and the facts are wrong."
The battle between the two banks started last summer, when $211 million- asset First Mariner bought 5,000 shares of Glen Burnie. On Jan. 27, First Mariner announced plans to buy an additional 171,000 shares, and on Feb. 4 it offered to buy the remaining 80% of Glen Burnie. The offer was rejected.
According to the suit, filed last week in Anne Arundel County Circuit Court, Ms. Demianchik was a member of Glen Burnie's board from 1995 to 1997. When told she would not be nominated as part of management's slate of directors at the 1997 meeting, she resigned "in order to seek election as part of a slate of dissidents."
The dissidents were defeated, but this year they tried again. Glen Burnie alleges that Mr. Hale helped choose this group of nominees, and funded the campaign.
"First Mariner has paid the expenses for the distribution of ... proxy solicitation materials," the suit states.
Also, this year's slate included "executives in the trucking and shipping industries, in which Hale has substantial business interests, and one of the nominees is former (Maryland) Gov. William Donald Schaefer," who is a member of First Mariner's board.
Mr. Hale confirmed that he is working with Ms. Demianchik-whose cousin is Glen Burnie's chairman, John E. Demyan-but said doing so is not against any law, and he denied funding her slate's campaign to join the Glen Burnie board.
"We, as stockholders, are working with other stockholders," he said. "We have the right to do what we can to unseat these people."
First Mariner now owns less than 1% of Glen Burnie shares, but the stock purchase plan announced in January, which awaits Fed approval, would bring its holding to 19.5%, way past the 10% state threshold.
Mr. Hale said he is not trying to dodge any law. "We are willing to wait five years," he said.
But Mr. Kuethe says he fears that Mr. Hale will not wait quietly.
"Even if he can't merge the banks, that doesn't stop him from taking our board over," Mr. Kuethe said. "I don't know what he plans to do. But I don't think it will be in the best interest of this bank."
Mr. Hale disagreed.
"We think there are many ways our banks can work together," he said. "But there is no working with the people currently in charge at Glen Burnie."