Shareholders Cast Votes for Directors of Crown Bancorp

Crown Bancorp shareholders finally got their chance to vote for directors Friday, but, because of legal challenges and California’s complicated cumulative voting procedures, who will control the Coronado-based bank holding company won’t be known for another week.

More than 120 people showed up at Crown’s long-anticipated, once-delayed annual meeting, but the expected fireworks were kept in check by a stern chairman and relatively tame queries from shareholders.

The armed security guards employed by the Hotel del Coronado that greeted Crown investors weren’t needed, thanks primarily to some deft management by Tom Phelps, Crown’s corporate attorney. Crown Chairman Dr. Philip Akre gave only a brief presentation.

A dissident group of investors, claiming that they may have enough proxies to elect a majority of directors, nominated five shareholders to the board. Management of Crown, a holding company for Bank of Coronado and Capital Bank of Carlsbad that has $60.4 million in assets, proposed its seven-member board for reelection.

Crown management has said it will challenge the proxies voted by dissident Ed Schmidt, former president of Capital Bank of Carlsbad, on the grounds that he gathered his support without first securing permission from state banking authorities.

Sources in the dissident camp said Friday, however, that it’s likely Schmidt will not vote more than 9.9% of Crown’s outstanding 628,000 shares. Change-of-control papers must be filed with regulators if a shareholder garners more than 10% of a company’s proxies.

Even if Crown successfully blocks Schmidt’s votes, dissident group sources said that they may have enough proxies to elect four members to the board.

A three-member independent committee will tally the votes and will report the outcome when Crown’s annual meeting reconvenes Aug. 8.

Complicating the vote count are California’s cumulative voting procedures, which allow shareholders to cast their proxies in any quantity and for any director. A holder of 100 shares voting for seven directors may, for example, cast 700 proxies for any one director.

Management nominees include Akre, Crown President J. Michael Justice, Capital Bank President William R. McLaurin, and outside directors Ronald Beaubien, Richard Goodenough, Scotty Morgan and Marco Palumbo.

In addition to Schmidt, the dissident group nominees are La Jolla financial planners Michael Saywitz and W. Aubrey Morrow, Carlsbad real estate developer Rodolfo Albin Jr., and Great American Resources President Gary Takessian. Two other previously identified dissidents were not nominated, apparently to avoid splitting the vote among the group’s supporters.

A three-member board committee--Akre, Justice and Beaubien--will cast management’s votes. In his presentation, Justice defended his track record--he was hired last fall--of cutting expenses and tightening Crown’s loan policies. He blamed prior management for the company’s problem loans and for last year’s $2.5-million loss.

His review of the past year also contained a strong reelection pitch: “You can’t turn the Queen Mary in the Panama Canal. We need more time.”