Former Claremont McKenna College official Jil Stark and the rest of the PFF Bancorp board of directors are being sued for selling the Rancho Cucamonga-based company in what amounts to a fire sale price of $1.35 per share. That deal, which would allow FBOP Corp., to takeover troubled PFF, is awaiting approval by the Securities and Exchange Commission and PFF shareholders.
According to the Riverside Press-Enterprise, the lawsuit was filed earlier this month by a shareholder upset with the sale:
The lawsuit was filed June 18 in Los Angeles Superior Court by attorneys for plaintiff Menachem Maiman. It alleges PFF officials "breached their fiduciary responsibilities to maximize" shareholder value, failed to engage in an orderly sale of the company, and agreed to sell at a price that is "grossly unfair."
The suit notes PFF stock had once traded as high as $30 in July 2007. As recently as April 30, it closed at $3.78 per share. On the day the merger was announced, the closing price was $1.25.
The suit asks the court to stop the merger, or rescind it if a court judgment is not rendered until after the merger is completed. It also asks that the defendants account to plaintiffs for all damages caused to them, and account for all profits and "any special benefits' obtained by defendants in the planning of the merger.
Joseph Levi, the attorney handling the suit for the plaintiff, is seeking to have the case certified as a class-action suit. PFF officials kept characteristically silent on the matter.
You can read the complaint on Attorney Levi's website. One of the interesting points it makes is that at a time when PFF's most immediate concern should have been a $44 million debt obligation that was coming due, the PFF board wasted valuable time trying to generate $460 million in cash through a stock offering that seemed to have very little likelihood of working out. In the meantime, the loan payment was coming due, and the PFF board was forced to hold their fire sale rather than conduct what the plaintiff's filing called "an orderly sale." According to the lawsuit, the $460 million the PFF board was chasing "far exceeded its historical equity."
Great leadership shows its strengths in times of crisis, no? This certainly seems to support what PFF employee Virginia Soper was saying back in May when PFF stock was still trading above $1.50 per share. If the FBOP takeover is allowed to go through, the PFF name will cease to exist after 116 years.
Imagine a financial institution surviving the Great Depression and then succumbing to this latest turn of events. That's a truly remarkable mismanagerial acheivement. An Inland Empire all-timer even.
PFF Bancorp shareholders can get more information about the lawsuit here.
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