Shareholder Files Suit Against Crown Over Proxy Fight
A dissident Crown Bancorp shareholder on Thursday filed suit against the bank holding company and its top two officers, charging that they have undercut the Crown’s stock value by taking legal action against a former officer who is leading a proxy fight against them.
Michael S. Saywitz, a La Jolla real estate syndicator and Crown Bancorp shareholder, charged in his lawsuit that Crown Chairman Phillip Akre and President J. Michael Justice breached their fiduciary duties by postponing the company’s scheduled June 30 annual shareholders’ meeting and filing a $10-million lawsuit against dissident shareholder and former officer Edward Schmidt.
The lawsuit--a derivative action filed in San Diego Superior Court--seeks $20 million in damages and is the latest in a series of legal and verbal battles that have besieged the Coronado bank holding company in the past month.
Crown, a $60-million-in-assets company, operates Bank of Coronado and Capital Bank of Carlsbad. It lost $2.5 million last year.
Crown officials would not comment on Saywitz’s lawsuit.
Schmidt, a founding president of Capital Bank, has for several weeks tried to solicit shareholder proxies by blaming current management for last year’s red ink and by pledging that he can raise up to $2.5 million in much-needed capital. Crown’s subsidiaries are under regulatory orders to raise their equity levels.
Canadian financier Milton Sorokin, former chairman of failed California Heritage Bank, is among the group of Crown shareholders who support Schmidt’s bid. Six other non-management nominees to the board have business or personal ties to either Schmidt or Sorokin, including Saywitz, who is a business associate of Sorokin.
Both Saywitz and Sorokin have accumulated large blocks of stock in recent weeks and are reportedly among those who would infuse capital into Crown.
Crown management believes Schmidt’s proxy campaign is illegal because he has not secured regulatory approval, and, last week, the company filed a $10-million suit against him. In its lawsuit and in a series of letters sent to shareholders, Crown officials said Schmidt’s bid has been “so fraught with falsehoods, misstatements and omissions as to be a fraud. . . .”
Losses From Loans
In addition, Crown officials claim that many of the company’s losses stem from loans made during Schmidt’s tenure at Capital Bank.
Schmidt, who has insisted that his campaign is within regulatory guidelines, on Thursday said he will soon file a countersuit against Crown.
In an interview earlier this week, Saywitz said he had wanted to avoid filing a lawsuit against Crown. On Sunday he and his attorney met with Akre and Crown’s attorney in an attempt to hammer out a compromise slate of directors.
The proposal called for management to choose four directors and the dissidents to select three. But talks stalled over whether Justice and Schmidt should be included on each side.
Schmidt was runner-up for Justice’s job last fall, and tension between the two remains high.
Saywitz, 45, is president of Syndicated Financial Design Group in La Jolla. He moved here in 1981 from Chicago, where he was a founding director of First Suburban Bancorp in Illinois and served several years as chairman of its lending committee.
