Effort at Compromise Fails in Crown Bancorp Dispute
The two factions vying for control of Crown Bancorp--current management versus a group led by dissident shareholders Ed Schmidt and an associate of Canadian financier Milton Sorokin--have tried unsuccessfully this week to negotiate a compromise slate of directors that would avoid both further legal action and an expensive proxy fight.
La Jolla financier Michael S. Saywitz, a business associate of Sorokin, met last Sunday for more than three hours with Crown Chairman Phillip Akre in an attempt to hammer out a compromise board of directors, according to sources close to the company.
Both Saywitz and Sorokin have reportedly accumulated a large block of Crown Bancorp stock in recent weeks and, together with Schmidt and the other non-management nominees, may now have a majority of Crown proxies, according to sources close to the company.
Saywitz proposed that four members of Crown’s seven-director slate be teamed with three of seven dissident-backed nominees, sources said.
Tension, Animosity
The stumbling block--at Sunday’s meeting and in subsequent telephone discussions--has been whether to include Schmidt in the dissident board group and Crown President Mike Justice in the management contingent, the sources said.
Schmidt was runner-up for Justice’s job last fall, and there exists tension and some animosity between the two men, according to sources close to the company.
The Times has learned that the outside board nominees who back Schmidt’s proxy fight include, in addition to Schmidt and Saywitz, La Jolla financial planner W. Aubrey Morrow, businessman Jerome Herman and Carlsbad real estate developer Rodolfo Albin Jr. The names of two other nominees--Escondido businessman Dale Stein and Great American Resources President Gary Takessian--have been previously disclosed.
Schmidt for several weeks has tried to solicit shareholder proxies by criticizing current Crown management for the Coronado-based holding company’s $2.5-million loss last year and by promising a new business plan and a capital infusion of as much as $2.5 million. Saywitz and Sorokin probably would be among those who would invest in Crown, banking industry sources said.
Crown--which operates Bank of Coronado and Capital Bank of Carlsbad--has countered Schmidt’s effort by claiming that the losses were caused in part by Schmidt during his tenure as founding director of Capital Bank.
Last week, Crown sued Schmidt for $10 million, charging that he was trying to take over the company without regulatory approval and without disclosing his supporters. Officials also postponed Crown’s annual meeting from June 30 to Aug. 1.
Saywitz on Wednesday said he is considering filing a class-action derivative shareholders’ lawsuit to prevent Crown management from using corporate funds in the suit against Schmidt.
Saywitz is president of Syndicated Financial Design Group in La Jolla and is a business partner of Sorokin. He shares office space with Morrow, whose firm, although similar in name, is unconnected to Saywitz’s company.
“I’m my own man,” Saywitz said Wednesday. “I know Milt Sorokin well . . . and I have several business dealings with him.”
Indeed, it was Saywitz and Sorokin who offered to buy Capital Bank late last year, but their offer never got a response, both Saywitz and Sorokin confirmed Wednesday.
Other Business Dealings
Herman, meanwhile, is a business associate of Sylvin Cooper, a Canadian developer who also has business dealings with Sorokin, according to banking industry sources.
Herman also reportedly had loans with Cal Heritage Bank, where Sorokin was a director before it was seized by regulators last year. Before the takeover, Sorokin had proposed infusing $1.7 million into the troubled bank.
Saywitz had also proposed a capital infusion for Cal Heritage but pulled out because of the bank’s weak financial position.
Three other nominees have ties to Schmidt from his tenure as founding president of Capital Bank of Carlsbad. Albin, Takessian and Stein were all members of Capital Bank of Carlsbad’s Corporate Business Council, an advisory group formed by Schmidt.
Morrow is connected to Schmidt because Pacific Pension Designs--where he is on leave as president--administered the pension plan paper work for Morrow’s clients.
“It’s so innocent,” said Morrow. “There is no conspiracy, no synergism of people ready to swoop in and take over Crown.”
Other supporters of the dissidents include former Crown Chairman Dustin Rose, former President James Klingensmith and Roque De La Fuente, a well-known car dealer, developer and a director of Pacific Commerce Bank who recently bought an undisclosed number of shares in Crown.
