Two shareholders of the Greater New York Savings Bank are trying to toss a wrench into the $2.5 billion-asset thrift's agreement to be bought by Astoria Financial Corp. Leonard Minzer and Harry Schipper, the shareholders, filed a lawsuit in federal district court in Brooklyn two weeks ago alleging that senior executives and board members are soliciting proxies in violation of Securities and Exchange Commission rules. The suit alleges that six top executives-including Greater New York Savings' chairman and chief executive officer Gerard C. Keegan-and nine board members had failed to disclose adequate information about the merger in a proxy statement sent to shareholders. The complaint in federal court alleges that Mr. Keegan received an offer from another bank by telephone on March 17, one day after he met with George L. Engelke Jr., president and chief executive officer of Astoria Financial, to discuss their deal. The suit contends that Greater New York Savings' proxy statement and notice to shareholders, filed in June, failed to disclose adequate information about that second offer. Shareholders for Astoria Financial and Greater New York Savings voted to approve the merger at a special meeting last Friday. The complaint also alleges breach of trust and breach of fiduciary duty on the part of Greater New York Savings executives and board members for agreeing to the deal. Mr. Minzer and Mr. Schipper seek to stop the merger from going through, and they are asking for class action status. A response is expected in twenty days. No trial date has yet been set. Jeanne Lufty, spokeswoman for Brooklyn-based Greater New York Savings, said "as we stated in our public filings, we believe the allegations are without merit." A spokesman for Astoria Financial, which was also named as a defendant in the suit for allegedly participating in the preparation of Greater New York Savings' proxy materials, declined to comment. But the spokesman said the merger was progressing as planned and is tentatively scheduled to close in late September, pending regulatory approvals. Greater New York Savings announced its plans for the $293 million merger with Astoria Financial on March 31. Astoria Financial, a $7.3 billion-asset thrift based in Lake Success, N.Y., agreed to exchange each share of Greater New York Savings stock for either 0.50 share of Astoria Financial common stock or $19 in cash. Wall Street analysts praised the deal when it was announced, and they remain enthusiastic about the merger. Many said it is unlikely that the shareholder suit will adversely impact the transaction's progress. "It's kind of a fait accompli by now," said Katrina Blecher, an analyst at Gruntal & Co. "It's a great deal for Greater's shareholders." When the merger was announced, Mr. Keegan issued a statement that said "this transaction provides significant value to our shareholders and will provide the platform for further enhancing the service we provide to our customers and communities we operate in." The lawsuit in federal court mirrors a complaint filed by the same two shareholders in New York State court in April. Greater New York Savings has filed to have the lawsuit in state court dismissed, and the case is pending.
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