James Klingensmith, a founding director and the only president of 5-year-old Crown Bancorp, has abruptly resigned after a year of controversy that included the company's first quarterly loss and the indictment of a branch manager on charges that she laundered money.
Klingensmith tendered his resignation Tuesday night at a joint meeting of the boards of directors of Crown and Bank of Coronado, Crown's largest subsidiary, explaining that some of his "views concerning several subjects . . . are contrary to the boards' (and) I see no practical resolution to the differences."
In an interview Wednesday, Klingensmith said he disagreed with directors on Crown's "direction (and) board policies." He would not elaborate.
Crown suffered its first quarterly loss, $261,000, in the first period ended March 31, and a preliminary report by Klingensmith last week showed a second-quarter profit of $90,000.
According to sources close to the bank, Klingensmith's public discussion of those second-quarter results before the board's audit committee had reviewed them heightened dissension.
The audit committee typically reviews the earnings and then determines how much should be written down in possible loan losses.
"He kept releasing figures before any write-downs," one Crown source explained.
Reserves for loan losses increased to $714,000 on March 31 from $428,000 at the end of 1984, reflecting concerns about possible bad loans, according to one Crown source.
The board will meet next week to discuss loan-loss reserves and perhaps additional write-downs for the second quarter, the source said.
In the other controversy, a San Ysidro branch manager of Bank of Coronado was arrested in April and indicted last month on charges of conspiring to defraud the bank, filing false cash transaction reports and failing to file cash reports required by the government.
Federal authorities have said the case, which is still under investigation, involves the laundering of proceeds from narcotics trafficking in 1984 and 1985.
Although Crown and Bank of Coronado were not directly implicated, banking industry sources inside and outside the company have privately questioned how the laundering could have gone unnoticed for so long by bank officials.
Meanwhile, Crown Chairman Dustin Rose said a search for a successor to Klingensmith is "under way--interviews are starting today."
He added that the bank probably will appoint an interim president.