On Friday, a reader responded to our last post about PFF Bancorp and the money earned by San Dimas Mayor Curt Morris (about $515,000) in August 2006 when the mayor cashed in his stock options, which he used to buy 17,852 shares of PFF stock for $7.38 in two transactions. Morris turned around and sold the shares the same days that he bought them for the going share price of around $36.00.
Morris had earned the options as a member of the PFF Board of Directors. As some loans to homebuilders and developers went south with the housing market, the stock (NYSE: PFB) fell on hard times recently and closed Friday with a stock price of $4.23 per share.
The reader wrote that Claremont's local connection on the PFF board, Jil Stark, also made out pretty well with her stock options. Stark was formerly the director of Claremont McKenna College's Marian Cook Miner Athenaeum. Stark's husband Jack served as CMC's third president from 1970 to 1999. Jack Stark is currently on the CMC Board of Trustees.
Our reader says:
Subject: Honi soit qui mal y pense??
To: claremontbuzz@yahoo.com
Dear Buzz,
As one who has lost a few dollars by investing in Pomona First Federal, I found your article on April 6 about Curt Morris, Mayor of San Dimas and PFF board member and his good luck and timing of stock sales quite interesting. Your article also mentions one of our local leading citizens Jil Stark, contributor to local charitable as well as political causes, as a member of that governing board. She did quite well, too. Personally, that is. In her position as presiding director of PFF's audit committee she did not do as well for the company.
When you published your article the closing stock price was $6.19. Today, it closed at $4.23, another 68% down. What does that have to do with Jill, you ask? Well, she is the only director who totally sold out all her stock during the period from February 12 to February 28, 2007, at prices ranging from $33 to $31.
According to published records in Yahoo.com, she has zero stock in the company. These same records show that she cleared about $417,000. One must be impressed by her skill and timing.
You wrote ... "one can do pretty well sitting on local boards...". I would change what follows to "even if the company does not perform well."
Cheers
As seen in the chart below, in February 2007 Stark made a series of five stock option transactions that netted her the approximately $417,000 our reader alluded to. The transactions were:
- 2/12/07
Option exercised: 2,000 shares at $7.38 per share; approximate cost: $15,000
Sold 2,000 shares at $11.37 per share; approximate proceeds: $23,000 - 2/14/07
Option exercised: 2,400 shares at $7.38 per share; approximate cost: $18,000
Sold 2,000 shares at $33.50 - $33.69 per share; approximate proceeds: $81,000 - 2/20/07
Option exercised: 6,300 shares at $7.38 per share; approximate cost: $46,000
Sold 6,300 shares at $33.63 per share; approximate proceeds: $212,000 - 2/22/07
Option exercised: 2,500 shares at $7.38 per share; approximate cost: $18,000
Sold 2,500 shares at $33.50 per share; approximate proceeds: $84,000 - 2/28/07
Option exercised: 4,652 shares at $7.38 per share; approximate cost: $34,000
Sold 4,652 shares at $31.84 per share; approximate proceeds: $148,000
And the preceding years were also good to Stark as PFF stock appreciated during the housing boom. Stark's investment strategy seems to be sound one: Get while the getting is good.
As the reader points out, at PFF Bancorp, as well as at any number of American companies, there seems to be a disconnect between risk, borne by shareholders (and taxpayers who have to bail out failing financial institutions) and rewards given to management.
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