Activist investor Joseph Stilwell has stepped up his campaign to oust the chief executive at First Financial Northwest (FFNW) in Renton, Wash.
Stilwell disclosed in a Securities and Exchange Commission filing Friday that he has filed a lawsuit against the $1 billion-asset First Financial seeking to invalidate the results of the company's recent board elections in which the CEO, Victor Karpiak, defeated Stilwell's nominee, Spencer Schneider.
Stilwell maintains that the results were bogus because the company did not count 8 million votes that he claims were properly cast for Schneider. Had they been counted, Schneider would have handily defeated Karpiak, Stilwell said in the lawsuit filed in King County (Wash.) Superior Court.
"This is a travesty of corporate governance," Stilwell said in the suit. "And the result is that an incumbent director that a majority of shareholders sought to evict from his position will instead now illegitimately continue to be in a position to make fundamental, irrevocable decisions about the corporation's path and future, against the shareholders' wishes."
Stilwell, who owns about 8.5% of First Financial's shares, wants his own representative on the board to pursue his agenda of ousting Karpiak and pressuring the board to put the company up for sale.
But First Financial argues that the 8 million proxy votes cast for Schneider were invalid because Schneider himself failed to sign a master ballot. The decision was confirmed by the proxy tabulation service Carl T. Hagberg and Associates.
Stilwell has filed the suit against the bank, Karpiak and the proxy service's inspector, Raymond Riley. He claims that Riley had preliminarily declared Schneider the winner but later backtracked under pressure from bank officials.
"Riley chose to do an about-face and treat those valid proxy votes as 'non-votes' at the self-interested urging of First Financial's management, solely because there was not an additional piece of paper — a so-called master ballot — redundantly reiterating what was already clear from the tabulations," Stilwell said.