Valley Federal Director Seeks Repayment for ’88 Proxy Fight
A year ago, businessman James J. Cotter successfully waged a bitter proxy fight to become a director of Valley Federal Savings & Loan, a large but struggling thrift in the San Fernando Valley with $3.5 billion in assets.
This year, Cotter is asking Valley Federal’s stockholders to pay him for his effort.
In proxy material for Valley Federal’s annual meeting, scheduled Thursday, the Van Nuys-based savings and loan stated that Cotter and Hecco Ventures I, an investment partnership of which Cotter is a partner, “made demand for reimbursement” of $347,869.44 for their expenses related to the proxy fight.
Hecco, which owns 9.8% of Valley Federal’s stock, and Cotter heavily criticized the S&L;’s management prior to Cotter’s election to the board. Cotter pursued the board seat--despite heated opposition by Valley Federal--to press for Valley Federal’s sale as a way to lift the company’s stock price.
Valley Federal stated in its proxy material that its management and independent directors found the Cotter/Hecco proxy costs “reasonable” and authorized reimbursement. But the Federal Home Loan Bank Board, which regulates thrifts, said the move has to be approved by Valley Federal’s stockholders Thursday, Valley Federal said.
Payment ‘Reasonable’
Why is Valley Federal willing to reimburse Cotter? John Marquis, Valley Federal’s senior vice president for marketing, declined to elaborate beyond the proxy. The proxy said the move “would eliminate a major source of discord” between Valley Federal and Hecco “without resort to litigation,” and that $347,869.44 is “reasonable in relation to the benefit” to Valley Federal “of resolving this controversy.”
In other words, Valley Federal thinks that reimbursing Cotter is cheaper than facing him in court.
Reimbursing dissident investors or hostile suitors to gain a peaceful truce is not uncommon. Polaroid recently paid $20 million to reimburse Shamrock Holdings--a Burbank investment concern that launched a hostile offer for the photographic giant--for Shamrock’s legal costs and other expenses.
Cotter did not return a telephone call requesting comment.
In November, Valley Federal announced that it had agreed to terms whereby Citadel Holding Corp., the Glendale parent of Fidelity Federal Savings & Loan, could make a proposal to acquire Valley Federal. But no formal offer from Citadel or any other party has been made.
Cotter is a former Citadel director, and Hecco is a major stockholder of Citadel.
Meanwhile, Valley Federal’s stock has drifted about 33% below its level of a year ago when Cotter was elected to the board. The stock closed Monday at $10 in over-the-counter trading, down from $15 a share at last year’s annual meeting. Helping to depress the stock is Valley Federal’s poor financial performance; the thrift lost $3 million in 1988.
