The bitter proxy battle at California's Professional Bancorp has become very unprofessional, according to chief executive Joel Kovner.
Mr. Kovner said last week that a group of dissident shareholders had employed dirty tactics in trying to gain control over the Santa Monica- based company's board of directors. The bid appears to have failed, but Mr. Kovner said he was left with a sour taste.
"It's a bittersweet victory," he said. "We're very happy with the outcome, but we're stunned that they would use this type of vehicle in a proxy fight." A lawsuit filed by a dissident shareholder - and withdrawn before the voting was complete - alluded to a purported sexual harassment complaint against the CEO.
Mr. Kovner said his group had retained control over the company's board of directors by a 4-3 margin, although the matter has been referred to federal court for a final decision because the board disallowed a substantial amount of votes by the dissident group.
None of Mr. Kovner's opponents, a group of Cincinnati investors controlling a large block of the bank's stock, returned calls for comment.
Professional is a Pennsylvania-registered company and Mr. Kovner said that "under Pennsylvania law, if the board of directors in good faith believe there is a group representing more than 20% of the voters trying to acquire the company, it is required to disallow those votes.
"We believe in good faith that they acted as a group and their votes should be disallowed," he added.
With those votes nullified, the existing board was able to secure its 4- 3 margin of victory. The legality of the move, though, has been referred to federal court in Los Angeles, where it will be heard beginning July 12.
Mr. Kovner said the bank will proceed with its business plan and is open to working with the dissident group.
The dissident group was seeking to remove members of the board of directors and management of Professional. A lawsuit by dissident shareholder Martin Goldfarb alleged that the bank was guilty of improper loan activity and that its board had not properly dealt with allegations of sexual harassment against Mr. Kovner by a female former employee. The allegations by Dr. Goldfarb, a Los Angeles-area physician, were made public in the bank's proxy statement. Mr. Kovner denied both charges.
Dr. Goldfarb's suit was dropped June 24, shortly before voting was complete.
"The way the American justice system works is that when charges are brought forth and then dropped, you're still left with the accusation. It's not fair," Mr. Kovner said.
Professional is coming off its best year, but the performance is somewhat skewed. The company had net earnings of $2 million last year, up from $1.3 million in 1994, but the 1995 figure was boosted by a one-time securities transaction in December.