Shareholder Seeks Control Over Citadel

Craig Corp., a Los Angeles company whose chairman is financier James J. Cotter, wants federal permission to exercise a “controlling influence” over Citadel Holding Corp., the Glendale-based parent of Fidelity Federal Bank, according to filings released Wednesday.

Craig already owns 8.9% of Citadel’s stock and has two representatives on Citadel’s board. If the federal Office of Thrift Supervision approves Craig’s application, it would allow Craig to get more seats on Citadel’s board or to increase its stake in the thrift, according to Edward L. Kane, chairman of Citadel and president of Craig.

Craig Corp. is a publicly traded holding company that owns 50% of Stater Bros., the 101-store grocery chain that is prominent in San Bernardino and Riverside counties.

According to Craig’s filing with the Securities and Exchange Commission, Citadel, which has assets of $5.7 billion, may need more capital in the future because of stiffer regulations. Craig could help the thrift get it, if the thrift supervision agency approves Craig’s request, the filing said. Citadel currently meets all federal standards for capital, the financial cushion meant to protect thrifts against losses.

Citadel’s stock closed Wednesday at $28.75 per share, up $1.375 in American Stock Exchange trading.

Even if it gets the federal agency’s permission, Craig doesn’t plan to take immediate steps, Kane said. Craig has no plans to increase its stake in Citadel or to get more representation on the thrift firm’s board, he said, and Citadel has “no plans to raise more capital.”

But if the agency approves Craig’s application, it could help settle a long-running dispute about who controls Citadel.

Alfred Roven, a former director of Citadel, has contended in a lawsuit filed last year that Cotter, through investment entities, actually took control of the thrift firm several years ago.

Cotter, from Los Angeles, has denied the claim. But the Office of Thrift Supervision has also “raised questions” about whether Hecco Ventures I--an investment vehicle for Cotter and Los Angeles investor Michael R. Forman that owns a separate 9.6% of Citadel--along with affiliates has “a controlling influence” over Citadel, according to an SEC filing by Hecco.

Hecco said that if Craig gets thrift agency permission, Hecco and Forman will let Cotter vote their shares in Citadel to put the agency’s questions “to rest.”