LOS ANGELES -- At California Federal Bank, the board of directors that fired former chairman Jerry St. Dennis now finds itself under fire from irate shareholders.

Last July, directors ousted Mr. St. Dennis, who had saved California Federal by completing a long-shot-recapitalization earlier this year. Two months later, several of the bank's major stockholders openly condemn the thrift's board. Some warn that a proxy fight looms

The stockholders have a litany of complaints. They say the abrupt dismissal of Mr. St. Dennis and chief executive William L. Callender was reckless, contributing to a 50% drop in the value of California Federal shares since March.

Foot Dragging

They accuse directors of ignoring shareholders' wishes and failing to keep lines of communication open. And they say board members are entrenching themselves by dragging their feet on a sale of the thrift.

But the shareholder complaints boil down to one essential point: The board, they charge, is a runaway group of amateurs that has hijacked the nation's sixth-largest thrift.

"The board appears completely self-interested and self-motivated," said Peter H. Frorer, president of San Francisco-based Frorer Capital Management, which owns about 1% of the thrift's shares. "It has completely destroyed the company's credibility and destroyed millions of dollars of shareholders' wealth."

Said Herb Stiles, a money manager with the Baltimore mutual fund firm T. Rowe Price, which has roughly a 5% stake: "I am in the process of talking with all directors to express my disappointment."

Legal Advice Sought

Several shareholders say they have sought legal advice on how to rein in the board. Several predict that an insurgent slate will run for three board slots that expire in March.

"There is a very strong likelihood those seats will be contested," said Albert Fried Jr., a New York investor who owns nearly 6% of outstanding shares. Mr. Fried was a candidate for Mr. St. Dennis's vacated board seat, but was rejected by directors at a Sept. 14 meeting.

No board members would speak about the clash on the record. But people close to the board say the conflict reflects a fundamental disagreement. Directors want to study the question of California Federal's future systematically, while stockholders want to engineer a quick sale of the thrift.

As a result of the recapitalization, according to people close to the board, major shareholders are former bondholders who may be unused to the volatility of equity investments.

Interim Chairman Provokes Ire

The man in the eye of the storm is Michael W. Arthur, 54, the Los Angeles consultant who joined the board in March and was named interim chairman after Mr. St. Dennis' departure in July.

Shareholders are scathing on the subject of Mr. Arthur, who they say was an underemployed consultant who had bounced from job to job. He was named a candidate for director earlier this year despite appearing at the interview wearing slacks and a sweater, shareholders say.

"You now have a chairman, paid in excess of $400,000 per year, who has absolutely no experience in the banking business," said Mr. Fried.

In an interview last week in the office he inherited from Mr. St. Dennis, Mr. Arthur was an amiable host who portrayed himself as above the fray.

Performance Cited

Asked about shareholder criticisms, Mr. Arthur declined to respond directly. Instead he offered a glowing review of his own performance.

"It's unimportant," he said of the personal attacks. Shareholders "were fortunate they got me. I've done a hell of a job."

Under his director, Me. Arthur said, California Federal is hammering out a strategy for slashing problem assets, which will probably include a bulk sale of distressed real estate. Despite the vacuum at the top, the thrift is showing marketing vigor and maintaining its share of mortgage originations, he contended.

In addition, he noted, the thrift is close to naming a new chief executive to replace Mr. Callender, who agreed to stay until the end of the year.

Investment Bank to Be Hired

California Federal will also soon select an investment bank to advise it on strategic options, including a possible sale. Mr. Arthur declined to identify the adviser, but sources close to the thrift say the board will hire Smith Barney Shearson.

Shareholders charge that California Federal's board has rebuffed acquisition overtures from several potential buyers, including First Interstate Bancorp.

California Federal's interim chairman would not discuss specific acquisition contacts, but he said the board is open to a sale. He noted, however, that any action would have to take place after a CEO and an investment adviser are in place.

Mr. Arthur said he would step down as chairman when a CEO is on board, although the new chief may not immediately get the title of chairman.

Board Was Handpicked

The conflict at California Federal is surprising, considering that all seven outside directors were picked by stockholder representatives after the thrift's recapitalization early this year.

The reorganization gave former debtholders about 80% of California Federal's common stock. All outside directors were then replaced to reflect the change in ownership.

The seven new directors, including entrepreneurs, consultants, and academics, are an activist group with strong views on management. But only three board members have bank or thrift experience.

Mr. St. Dennis alienated directors by insisting on complete control over the thrift's operations and failing to heed their advice on management issues, according to people close to the board. Board members also lacked faith in his ability to develop an operating strategy or build the thrift's marketing capabilities.

Problem Assets

Mr. Callender was blamed for not managing problem assets aggressively enough.

When the board met last July, the majority of directors were determined to fire the top two executives, sources said. They asked for Mr. Callender's resignation immediately.

When Mr. St. Dennis asked what directors intended to do with him, they requested that he remain until the end of the year. He responded by offering his immediate resignation. Directors then reversed themselves and asked Mr. Callender to stay until a new CEO was hired.

Mr. St. Dennis declined to comment on the events.

The announcement of his departure came at the same time the thrift disclosed a $45.5 million second-quarter loss due to writedowns of problem assets.

Investors Don't Buy Story

The thrift's explanation for Mr. St. Dennis' resignation was that he lacked a strategy following the recapitalization, but few investors were convinced. "Shareholders were shocked when St. Dennis was forced out," said Mr. Frorer.

Later, some investors were angry that the board rejected the investment boutique Houlihan Lokey Howard & Zukin as its adviser in favor of Smith Barney. Houlihan, which advised bondholders in California Federal's restructuring, was seen as better prepared to help sell the thrift.

What prompted an open break between directors and major shareholders was the board's rejection in September of Mr. Fried for the director's seat vacated by Mr. St. Dennis. As a major stockholder himself, Mr. Fried's candidacy was widely supported by other shareholders.

Mr. Arthur declined to comment on the vote.

"The board sent a very clear message to shareholders: "We're not interested in your views,'" Mr. Fried said. "But boards disregard the wished of shareholders at their peril."

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