Panel Appointment Amid Proxy Battle Draws Fire

Shareholders of one of the country’s few paired-share real estate investment trusts, First Union Real Estate Equity & Mortgage Investment, are questioning its appointment of trustee Russell Gifford as an independent board member because of his role in managing one of First Union’s business units.

Gifford, 58, earlier this month was named to head an independent committee of outside trustees as First Union tries to fight off a proxy battle launched by dissident shareholder Gotham Partners, which owns about a 9% stake in the Cleveland-based real estate company.

However, according to a new release posted on the Web site of First Union’s Impark parking garage operations, Gifford was named chief executive of Impark’s VenTek parts manufacturing unit on March 1.

“The time has come for sophisticated executive management and Russ can deliver that. He will take VenTek to another level,” the press release quoted Impark Chairman and Chief Executive Paul Clough.

Employees answering the phone at VenTek’s offices in Petaluma, Calif., identified Gifford as its chief executive.

First Union officials, however, denied that Gifford had been named chief executive of VenTek. Rather, they said, he is an unpaid consultant, adding that the news release was posted in error. The release was on the Web site as late as Friday but has since been taken off.

Gifford, a trustee since 1991, wasn’t immediately available for comment.

In Securities and Exchange Commission filings, First Union identifies Gifford as the former president of CNG Energy Services Corp., an energy marketing company, from 1994 to 1997. The filings do not mention his role with VenTek.

First Union owns shopping centers, parking garages, apartments and office buildings. VenTek makes equipment used in parking garages and public transit systems. It is also one of the last “paired-share” real estate investment trusts, which are allowed to both own real estate and operating companies.

In a statement, Gotham called First Union’s neglect in alerting shareholders to Gifford’s role in VenTek “reprehensible” and a “conflict of interest.” It also wants Gifford to resign from the committee of independent trustees.

New York-based Gotham has charged First Union with overpaying for acquisitions and selling stock partly to dilute the stakes of the largest shareholders. The stock is down about 23% over the last 12 months, and its first-quarter earnings tumbled 37%.

Gotham has nominated its own slate of directors to First Union’s board and has said that, if successful, it would consider ousting First Union’s management.