Fruit Falling Far From the Tree

CUSD Board Member

Jeff Stark

That photo of Jeff Stark at the Labor Day campaign kickoff for Russ Warner, the Democratic candidate running against incumbent Republican David Dreier for California's 26th congressional district seat, reminded us of some Stark's own family history and how it's linked to Dreier.

Dreier, for those of you who don't know, got his undergraduate degree in political science from Claremont Men's College (now Claremont McKenna College) in 1975. Dreier later earned a masters degree in government from Claremont Graduate School (now CGU). He also worked as a director of corporate relations at CMC. In 1980, our district elected Dreier to Congress, where he has been ensconced ever since.

At CMC Dreier (photo, right) no doubt crossed paths with Jeff Stark's father, Jack Stark, who was CMC's president from 1970 to 1999. Dreier would have also met Jeff's mother, Jil Stark, who was the director of the Marion Miner Cook Athenaeum. It turns out that the Starks kept in contact with Dreier after he became a congressman.

We checked and saw that both of Jeff's parents donated to Dreier's campaign war chest. The Huffington Post's FundRace listed two donations for Jil, one in 2009 for $1,000 and one in 2007 for $1,150. Notice that the latter contribution Jil's trustee position with the now-defunct PFF Bank & Trust, a 116-year-old local institution that survived the Great Depression but couldn't survive our Great Recession.

You'll recall that Jil Stark made a small fortune off PFF stock options right before the stock price plummeted. She may have used some of that windfall to help out a friend:

Click on Images to Enlarge

Jack Stark, too, got into the act, throwing a $600 bone Dreier's way in 2009:



We noticed that the Starks' son Jeff is a registered Republican, so one would presume he's a Dreier supporter as well. That's why we were so surprised to see him caught at the Russ Warner event. We hear Jeff didn't stick around very long. Maybe word got out to Dreier's office. Or to Jeff's folks.

Next time, Jeff ought to send Ken Corhan in his place. Ken's much more slick when it comes to this kind of sneaking around.

Monday CUSD Recap

The Claremont Unified School District continues to fascinate inquiring minds.

We noticed that the Daily Bulletin article on the CUSD school board meeting last Thursday cited a person named Bill Fox, who spoke in favor of the board's proposed $95 million bond:

"It's an opportunity to take advantage of a crisis in the construction industry," resident Bill Fox said. "Construction costs are way down. It's a much different environment than 10 years ago. Ten years ago, when Measure Y (a $12.5 million school facilities bond) passed, we had very different challenges in bidding on what was out there. What we're seeing is prices are coming down."

(As we have pointed out, the Bulletin was incorrect. Measure Y was $48.9 million, not $12.5 million.)

We had wondered if Bill Fox was any relation to Michael K. Fox and Fox Transportation, who together donated $10,000 to the last CUSD bond campaign in 2000. We still don't know if there is any connection, but we do know that Bill Fox is a Claremont resident and is the president of The William Fox Group, which, among other things, operates a housing development company called William Fox Homes. Fox is also Claremont High baseball team sponsor.

If memory serves, Fox has served on a Claremont school district advisory committee. We believe it was Fox who first suggested that the district might be well-served leasing out it's old district office land on Base Line Rd. to an RV storage business. Fox would presumably know about the profit that CUSD could earn through such an arrangement because his company operates Route 66 Self Storage at 450 Foothill Blvd. Route 66 Self Storage advertises RV storage as one of its services.

In any case, Fox is very deeply involved in school issues and in the community. Here's a photo from the 2009 Claremont Educational Foundation newsletter showing Fox and his wife Cindy posing with former Claremont mayor Dianne Ring, Ring's husband Robert, and Ken Corhan (whom we last saw working on Bridget Healy's failed 2009 city council campaign):


Fox is also involved with the LA County Fair Association, according to a press release from 4/11/09:

Contact:
Sharon Autry (909) 865-4262
Wendy Talarico (909) 865-4263

For Immediate Release

LOS ANGELES COUNTY FAIR ASSOCIATION NAMES NEWEST MEMBER

William R. Fox has been named to the Los Angeles County Fair Association. Fox is president of William Fox Group and William Fox Homes Inc. located In Ontario.

He founded the companies in 2003 to engage in commercial and residential construction and development. He graduated from the University of Southern California with a bachelor of science degree in business administration. He currently serves as a member of the Claremont committee for the L.A. County Fair, on the Claremont School District Site Council and Claremont School Asset Advisory Committee. He resides in Claremont with his wife, Cindy, and children Heather and Brian.

The appointment complements a roster of nearly 50 notable and dynamic community and civic leaders that serve on the association of the not-for-profit organization. The LACFA operates and manages Fairplex, home of the L.A. County Fair and more than 500 diverse year-round events.

If you read Saturday's Claremont Courier, you may have also seen reporter Landus Rigsby's coverage of the Thursday CUSD meeting (no link available). Rigsby didn't mention Bill Fox, but he did quote another bond supporter named Mike Seder:

"To me, it all comes down to timing," said Claremont resident Mike Seder. "We have an emergency right now. We have a school [district] that depends on a state budget that is unreliable at best and if we are going to take control, we need to do it now. This is an investment we need to make in our schools and in our children. What we do now will leave a legacy for future generations of students."

Seder (pictured, left), like Bill Fox, CUSD school board member Jeff Stark, and Stark's mother Jil, has a connection to the LA County Fair Association. Seder is LACFA's Vice-President of Finance and CFO. Jil Stark is (was?) and LACFA board member, and Jeff Stark, along with fellow CUSD board member Beth Bingham, Arteco Partners owner Ed Tessier, and Claremont Club owner Sue Hyland, is an LACFA member as well:

Click on Images to Enlarge

This all just goes to show how well-networked are the movers and shakers in our neck of the woods. But, then, it's like everywhere.

We just hope (but don't really expect) that they'd be open to contrarian views. As we've noted in the past, many of our community's problems have been a result of a groupthink mentality in which a collection of individually intelligent people makes collectively stupid decisions by excluding important information that just doesn't fit the group's preconceptions.

Nothing New Under the Sun

HISTORY REPEATING ITSELF

It's been a while since we took a trip in the Insider Institute's time travel capsule (our liability insurer raised some concerns after our last trip). But the Claremont Unified School District's consideration of a bond resolution caused us to cast our temporal gaze back to 2000 and the district's last bond.

In preparation of our time-tripping, we did a little research in our archival vault (pictured, right). We located a number of relevant documents from CUSD's Measure Y campaign. Now, 10 years later, we can see that the district and the Claremonsters have not only recycled old slogans for the 2010 bond, but they also misled the public when it came to the uses of the Measure Y bond money. In that instance, as in the present one, some of the erroneous claims the bond proponents made may have been misstatements, but others were blatantly manipulative.

Before we go any further, here's the text from the mailer CUSD sent out this past week. We'll need this to refer to later:

(Click Images to Enlarge)

SEEMS LIKE OLD TIMES

Back at the end of May 2000, right before the June Measure Y election, the Claremont Courier ran an opinion piece from CUSD's then-superintendent Douglas Keeler. The essay enumerated the reasons Keeler felt the bond was needed, and he touched on all of the talking points ginned up by the Claremont 400 and district's election consultant. Keeler's piece included a committee's recommendations regarding a possible bond.

Here are Keeler's comments. They appeared on 5/27/00, just before the June election:


Keeler listed the suggestions from district's Facility Advisory Committee, chaired by Jeanne Hamilton. Hamilton would later be elected to the school board in 2001. Hamilton and her committee recommended a number of things. Two things that the committee determined were that the district should:

• Modernize Claremont schools (roofs, electrical, plumbing, etc.)
• Convert the La Puerta Adult Education Site to an elementary site
  

If the Measure Y bond was supposed to modernize our schools roofs, electrical, and plumbing, why do we need to do the same repairs again only 10 years later? This week's CUSD flyer for the 2010 bond says that "The bond would improve Claremont schools by: ....Repairing and replacing old leaky roofs and plumbing....Improving student and school safety by updating fire alarms and wiring."

And the district's original resolution for the Measure Y bond included a bullet list for each Claremont school stating that the district would be replacing deteriorating roofs, replacing aging doors and windows, modernizing the district's technological and communication infrastructure systems at every school facility, and a host of other things.

Either Measure Y's $48.9 million was misspent, or the district isn't being truthful now when it claims that some of the same things need to be done 10 years later. Roofs, doors, electrical and communication wiring should last longer than 10 years.

And as for La Puerta, the district concluded they didn't need another elementary school after all. What happened to the $4.5 million from the bond that was budgeted for converting the adult school?

Let's also not forget that CUSD initially said they would use a chunk of the money to build a football stadium next to the Claremont High School. However, when residents in the neighboring Towne Ranch area became upset, imperiling the bond vote, CUSD turned around and said they had no plans at all to put the football stadium on the CHS campus. District officials said they were looking to build somewhere else. Bond opponents warned the Towne Ranch residents that the district was not being honest about its plans. But enough of them were mollified that the bond measure passed.

Drive by CHS now and take a gander at the football field, bleachers, and field lights. Sorry, Towne Ranch neighbors, you took the hit on that one.

Oh, and one last point about that electrical wiring. In 2000, the Yes on Y campaign sent out a district-wide mailer that had a photo of an electrical wiring junction box. The box had no cover, so the wires were exposed for kids to electrocute themselves.

Sound familiar?

As we noted yesterday, CUSD's mailer this week had a photo of bare wires. The wires were presumably supposed sound alarms with parents about safety in our schools and, to underscore the point, the photo appeared adjacent to a bullet point about using the proposed bond money for school safety and for updating wiring.

Here's a comparison of the two photos:

LEFT: 2000 CUSD election flier photo
CAPTION: "30-year-old wiring at Eleanor Condit Elem. School."

RIGHT: 2010 CUSD flier photo
CAPTION: "Old outdated wiring like that pictured here from Eleanor Daly Condit Elementary School must be updated to improve student safety and support classroom technology."

Hmmm, same school, same kind of photos taken 10 years apart. And the photo on the right isn't even electrical wiring! If you enlarge it, you can clearly see those are telephone wires with a telephone jack right below. Not exactly a safety hazard.

The wiring photos reminded us of the scandal-within-the-scandal involving British Petroleum and their oil spill. BP, to show how hard they have been working on the cleanup, posted on their website a photo of their crisis command center and another of a helicopter crew flying towards the flaming well. The problem was that they were both photoshopped. Some of the monitor images in the crisis center were added in, and the helicopter in the photo was actually on the ground, not flying over the Gulf of Mexico.

As we in Claremont have learned the hard way, reality in the hands of a master PR person or an election consultant is infinitely malleable.


JEFF TAKES CHARGE

It turns out that current school board member Jeff Stark, along with the aforementioned Jeanne Hamilton, were co-chairs of the Yes on Y committee. Stark is a financial advisor, so he presumably had the education and experience needed to lead the bond campaign. Stark's experience would certainly probably him to review the currently bond proposal as well.

(On the other hand, let's hope Jeff didn't inherit his financial acumen from his mother Jil Stark. Jil was a board member of the now-defunct PFF Bancorp. You'll recall that Jil made a small fortune off PFF stock shortly before it crashed.)

Jeff was the public face of the Measure Y campaign. The Yes on Y people sent out a district-wide mailer that featured the Stark family. That was the mailer with the electrical wiring. It was supposed to demonstrate the continuity of the community's (or the 400's?) vision. Here is the flyer:


















Notice the slogan: "It's hard to believe it's been 35 years..." The argument in 2000 was Claremont's schools were aging - 35 years old or older. The mailer, written as a letter from Jeff Stark to the community, said Claremont's schools desperately needed upgrading and maintenance.

This time around, the mantra is, "it's been 10 years; it's time to have another bond because Claremont schools desperately need upgrading and maintenance." At the present rate of accelerated wear, down from 35 years to 10 years, we'll need another bond in three years at twice the price. And another one year after that.

Folks, $95 million is an awful lot of money for a small school district like Claremont, especially when the district hasn't identified any specific projects requiring the money. The last time around, they at least did that much, even if they didn't complete them. The absence of such a project list may be quite intention. If they don't have concrete goals set, the district and its board cannot be held accountable. That is simply not prudent given CUSD's track record.

There are plenty of other measures that can be taken to address the district's budget problems. There are other, reasonable alternatives. The powers-that-be in Claremont, however, refuse to listen to reason, refuse to acknowledge other, less costly ways of getting through this bad patch.

The $95 million bond train left the station quite a while ago, but if you're interested in watching a slow-rolling wreck, you should consider going to watch tonight's CUSD board meeting. It all starts 6:30pm in the boardroom at the district's Richard S. Kirkendall Education Center at 170 W. San Jose Ave.

Accounting for PFF's Fall

Daily Bulletin reader Dwight Siebert of Claremont has a letter in today's paper commenting on the collapse of PFF Bancorp. Siebert, who says he had a PFF account 50 years ago as a paperboy, writes that PFF, which survived two world wars and the Great Depression may need some lessons in accountability:

Now PFF board member Jil Stark is quoted in the Daily Bulletin (June 16, 2008) saying she never thought the bank would be in such dire straits where a buyout was the only viable option.

Sounds to me like the rest of the board wasn't thinking, either.

As we wrote last week, PFF and its board have been sued by a shareholder who is seeking class-action status for PFF shareholders claiming the PFF board breached its fiduciary duties by failing to adequately manage the bank's crisis.

Stark and the PFF board may be learning that the Claremont way of handling crises - ignoring them when they're developing and denying responsibility after the fact - won't work in this case.

Class Action Suit Sought Against PFF Board

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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PFF Agrees to Buyout

The Los Angeles Times reported today that PFF Bancorp, parent company to PFF Bank & Trust, has agreed to be acquired by FBOP, Inc, an Illinois-based banking concern and parent company to California National Bank.

The Times article focused on the problems facing local community banks, problems directly tied to construction loans and the housing market crash:

Southern California's oldest bank, PFF -- formerly Pomona First Federal -- had doubled its loan portfolio to $4 billion over the last decade, in large part by financing residential developers and builders of affordable housing in the Inland Empire.

But the bank's losses on such lending has soared, sending the stock price of its parent company, PFF Bancorp, down 90% this year. Desperate for fresh capital, the company agreed Monday to be acquired for $30.5 million in cash.

Home-mortgage specialists may have been the first lenders to suffer for their roles in financing the housing bubble. But, as foreclosures rise and home prices fall, many smaller banks and thrifts that backed residential developers and home builders are watching black ink turn red and are spending uncomfortable amounts of time with regulators. The financial institutions also are enduring jabs from critics who say they tossed lending standards out the window.

PFF Chief Executive Kevin McCarthy said in an interview that his bank started pulling back on land loans two years ago, anticipating a downturn like "the normal economic cycles we've always had out here."

"But nobody foresaw what would happen to the housing market, or that sub-prime mortgages would collapse so completely," he said. As for the sale to Oak Park, Ill.-based FBOP Corp., parent company of community banks including California National Bank, McCarthy said it was a hard but necessary choice: "I'm doing this to keep as many employees on the job as I can."

Community banks embraced commercial lending in recent years, largely ceding home loans, credit cards and other mass-market products to big national players.

Residential construction loans, which generate big fees, were especially profitable for smaller banks -- until housing collapsed in places like the Inland Empire, where prices are down more than 30% from their highs, and the Central Valley, where some former boom markets are off more than 40%. Raw land on which Ontario-based Empire Land installed roads, sewers and utilities, expecting to then sell it to builders, has declined even more.

The Daily Bulletin's Matt Wrye also reported on PFF and said the takeover deal is pending shareholder approval. The article painted a dire picture for PFF:

"I don't think shareholders have a whole lot of options," said Joseph Gladue, banking analyst with Los Angeles-based B. Riley & Company, Inc., about whether shareholders will approve the deal. "They're sort of between a rock and a hard spot. If the company falls under `adequately capitalized,' the (federal) regulators will come in and put some severe restrictions on it."

PFF reported millions of dollars in loan losses over its last two quarters because housing developers stung by the subprime mortgage meltdown can't repay PFF what they borrowed.

Monday marked the bank's deadline to pay off a $44 million overdue loan from an undisclosed lender, but the bank, once again, couldn't make deadline. It's been pushed off until June 16 of next year.

PFF's losses for the quarter ending March 31 are also a lot higher than expected: $204 million.

Claremonter Jil Stark, who has been on the PFF Board of Directors since 1975, is also quoted in the article. When PFF stock (PFB: NYSE) was flying high not all that long ago, Stark made about $417,000 from her stock options.

Boom Towns

The boom town that was the Inland Empire has been undergoing a "boom" of another sort, and Claremont isn't excepted from from the experience:


BROTHER CAN YOU SPARE $460 MILLION?

PFF Bancorp (NYSE: PFB) was back in the news Friday. The Daily Bulletin's business reporter Matt Wrye had a brief article noting that PFF Bancorp was looking to generate $460 million. The Rancho Cucamonga-based banking company had to ask for an extension on a $44 million overdue loan at the end of May and is looking to pay that off.

Wrye's article stated that PFF hadn't disclosed any details about the $460 million deal and said that it would require shareholder approval. The article also said the deal would involve a stock offering. The piece gave some background on PFF's problems:

The bank has written off millions of dollars in losses over the last couple of quarters.

In the midst of a booming, inflated housing market, CEO Kevin McCarthy signed off on loans to housing developers who can't repay what they borrowed.

Some experts speculate PFF is on the verge of government receivership if private equity doesn't come to its rescue, or if the bank isn't bought out.

The bank's stock closed Thursday at $1.33, a mere fraction of its $39 value just two years ago.

PFF's board of directors had no problems with CEO McCarthy's management of the company when it was flying high, and several of them, including San Dimas Mayor Curt Morris and former Claremont McKenna College Athenaeum director Jil Stark made out pretty well with their stock options prior to PFF's collapse.

Now that the party's over, the PFF board has kept a pretty low profile. We'll see how long they can keep that up.


HOUSING MARKET WOES

As Matt Wrye's article observed, PFF's problems had their roots in the housing market downturn. Loans to builders and developers turned bad, and share value eroded as a result. The Inland Empire has been hit particularly hard by the problems in the housing market.

Wrye had another article yesterday that posed the question, "When will it end?" to several real estate experts. One of them, Rancho Cucamonga developer Jeffrey Burum, thought the market might not fully recover until 2012.

Burum, coincidentally, helped PFF Bancorp out a couple months back when he bought a portfolio of problem loans from PFF. The loans had originally been valued at around $100 million, but by the time Burum bought them off PFF, they were worth only $60 million. Burum paid $22.5 cents on the dollar for those loans, the Daily Bulletin reported.


CITIES HELPING BUILDERS CLOG THE ROADWAYS

People who've grown up in the area can tell you that traffic has worsened over the years. Builders and their lobbying groups such as the Building Industry Association, funnel large amounts of money to elected officials (see our piece on Pomona Mayor Norma Torres' contributors for her State Assembly run), and that gets translated into poorly planned residential and business developments getting easy approval by those same officials.

At the same time, state officials have been siphoning off transportation funds to try to balance the state budget. Consequently, much-need transportation infrastructure repairs and improvements have been neglected. The added traffic created by all those building projects over the years hasn't been matched by new freeway and public transit projects and simply gets dumped onto our already crowded roads.

The LA Times is running a series on traffic issues and the failure of state and local governments to address these issues, despite voters approving billions in financing for transportation funds. Today's installment in the Times' series charges local officials with bypassing laws requiring builders to help pay for transportation projects to carry the traffic their projects generate:

* State and local officials have not expanded the region's highways and mass transit systems enough to keep up with population growth.

The population of the five-county Southern California region grew 22% from 1990 to 2006, and the total miles driven by motorists has increased about 42%. But the number of miles of highway in the region has increased by only 7.5%.

Since 2001, Govs. Gray Davis and Arnold Schwarzenegger, along with state legislators, repeatedly have diverted money from the state's taxes on gasoline to pay for non-transportation programs. Schwarzenegger plans to do so again in the budget for the coming year. Roughly $5.8 billion in highway and mass-transit funds that were diverted during the state's repeated budget crises this decade have not yet been repaid.

While the region's highway capacity has lagged behind population growth, mass transit has not made up the difference. Los Angeles County for the last 25 years has put three-quarters of its voter-approved transportation money into rail and bus systems. Even with the investment of about $7 billion, 85% of commuters still drive.

* At the same time, local officials repeatedly have sidestepped state laws that were supposed to require developers to lessen the traffic-snarling effects of projects.

For years, elected county and city officials across Southern California have put economic development and jobs ahead of mobility, approving major commercial and residential developments without requiring builders to pay enough for improvements needed to handle extra traffic.

All that development contributes to congestion that for the average motorist in L.A. and Orange counties adds up to almost two workweeks of delay each year, according to the Texas Transportation Institute, a think tank at Texas A&M University that compiles annual assessments of congestion nationwide. That's almost double what it was in the 1980s. In Ventura County , congestion-related delays each year consume roughly a workweek of the average motorist's life. The delay in the Inland Empire equals about six workdays.

Keep all of that in mind if in the future you see Claremont councilpeople greenlighting a new condo project or if you see a local State Assemblyperson voting for legislation affecting the building industry.

If traffic keeps going the way it has the past 20 years, the next boom we observe just may be one lowered on irresponsible state and local elected officials.

PFF Bancorp: Directors First

Trading in PFF Bancorp shares resumed on the New York Stock Exchange yesterday, a day after the NYSE suspended trading of the stock. PFF is the parent company of PFF Bank & Trust.

PFF Bancorp (PFB: NYSE) continued it plunge from its 52-week high of $30.37 and closed yesterday down to $2.48 per share, or minus 34% for the day. Yesterday's fall came on the heels of bad from the bank Wednesday, according to a Daily Bulletin article by Matt Wrye:

But late Wednesday, PFF announced that it expects to report one of its largest ever quarterly losses, totaling $159 million for its fourth quarter ended March 31.

"These losses reflect continued difficulty in the real estate market that all financial institutions are experiencing," said PFF spokesman David Sweet.

PFF also disclosed plans to restructure a $44 million loan with an unidentified commercial bank that it couldn't repay by an April 30 deadline - an event that could have led to a default.

In yet another surprise, PFF announced loan and lease losses greater than expected in the quarter, a sign of the deepening real estate quagmire gripping the region.

A provision for loan and lease losses of $196 million is expected in the quarter, the bank said. This provision is related to real estate loans in the greater Inland Empire region.

PFF director Jil Stark, who is described on PFF's website as a retired Claremont McKenna College administrator and former Scripps College faculty member,was also quoted in the article:

Long-time PFF board member Jil Stark was out of town on Wednesday but said she was "surprised" to hear news of the halted stock trading. Bad weather cut off the phone connection to her June Lake cabin most of the day, she said. Stark joined the board in 1975. "We've weathered many cycles of ups and downs, and each had its unique challenges," Stark said.

The current crisis, due in part to homebuilder loans that have gone bad, certainly qualifies as a unique challenge. For PFF, which has been around since the late 1800's, this is probably the worst down for them since the Great Depression.

Of course, one thing easing Stark's pain is the fact that she was able to cash in on some PFF stock options in early 2007 for a $417,000 profit.

For bank employees, shareholders, and customers, the prospect of weathering the current down cycle may be considerably less certain without the sort of cushion Stark has.

After the Matt Wrye article was posted on the Bulletin's website, one of our readers wrote in and was less than enamored of Stark's stiff-upper-lip talk:

You should have included Jil Stark's comments in your blog. She sounds somewhat like Marie Antoinette who, when informed that the masses were without bread, allegedly said "Let them eat cake". Jil, who is enjoying her June Lake home and could not be reached, has been able to have HER cake and eat it as well by cashing out her stock (some or all, I am not sure which) before the bottom fell out of the PFF stock.

Yes, and at least one other PFF director, San Dimas Mayor Curt Morris did even better than Stark, netting $515,000 in 2006.

PFF Bank & Trust, assuming they are able to weather this down cycle without having to file for bankruptcy or being bought out, may need to change its motto.

PFF Bancorp Suspends Trading of Stock

Rancho Cucamonga-based PFF Bancorp suspended trading of its stock on the New York Stock Exchange this morning, the San Bernardino Sun reported.

PFF Bancorp (PFB: NYSE), which had a 52-week high of $30.37, closed yesterday at $3.74 per share. PFF had been hammered as part of the fallout from the mortgage crisis and had to sell off $100 million in problem loans to homebuilders and developers earlier month.

The Sun article said:

RANCHO CUCAMONGA - PFF Bancorp, a troubled Rancho Cucamonga-based banking institution stung by the real estate meltdown, halted trading in its stock today.

Sal Curasi, a PFF spokesman, declined to comment why.

"We have no information to share with you on that," Curasi said.

NYSE spokesman Scott Peterson said the stock was halted at 9:30 a.m. (EDT) for announcement of "pending news." As of mid-day, the stock still hadn't traded. "Unfortunately, any interaction between the NYSE and its listed companies is non-public information," Peterson said.

"That's unusual," said Joe Gladue, an analyst with B. Riley & Co. Inc. "Of course, someone could be buying them."

If you were lucky enough to get out of the stock when it was still up, you might have made out okay, as San Dimas Mayor Curt Morris did. Or the former director of Claremont McKenna College's Marian Miner Cook Athenaeum, Jil Stark. Both are on PFF Bancorp's Board of Directors.

For those lucky few there was an embarrassment of riches, to the tune of many hundreds of thousands of dollars. For the rest, not so much. Looking back on it, the collapse to under $7.00 a share at the beginning of the month doesn't look so bad now.

Cashing In on PFF Bancorp

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.

Click to Enlarge

PFF Bancorp Notes

PFF Bancorp, the parent company of PFF Bank & Trust, has been taking a beating on the New York Stock Exchange, as we noted Wednesday.

The Daily Bulletin had reported that Rancho Cucamonga-based PFF had to sell about $100 million in problem commercial and builder loans to a local private equity firm run by developer Jeffrey Burum. A reader has pointed out that Burum's bio indicates that he was the chairman and CEO of Southern California Housing Development Corporation (now known as National CORE), a non-profit dedicated to developing affordable housing opportunities. He currently serves as co-chair of National CORE's board of directors.

Our reader noted that Southern California Affordable Housing Corp. was the developer former Claremont City Manager Glenn Southard was pushing to develop the affordable housing site at Towne Ave. and Base Line Rd.

Let's take a look at PFF Bancorp's Board of Directors:

PFF Bancorp Board of Directors

Our reader also pointed out that there are some interesting local connections to the PFF's board. For instance, Jil Stark, the former director of Claremont McKenna College's Marian Cook Miner Athenaeum, is a longtime PFF board member. Stark, who has been on PFF's board since 1975 and has been chair of the Audit Committee since 1977. Stark is also on the Los Angeles County Fair board, the City of Claremont's Committee on Aging, the Claremont Community Foundation's Argus Board, and was even a $200 contributor to Preserve Claremont, that group of morally upright citizens who promised to bring civility and righteousness back to Claremont back in 2005 city elections.

(On that last point, the cure was worse than the alleged disease, it turned out - the Preserve Claremont campaign, fronted by Human Services Commissioner Valerie Martinez and former Claremont Mayor and current Kiwanis president Paul Held, degenerated into a whispering campaign of false innuendo. All of the responsible parties, though, seem to have come out of it unharmed and guilt-free. )

But we digress.

Getting back to PFF Bancorp, the reader also pointed out that San Dimas Mayor Curt Morris is on the PFF board. Morris, an attorney and mayor of San Dimas since 1996, has done pretty well by PFF. SEC filings showed that in August, 2006, Morris made a series of stock option trades that netted him around $515,000 before taxes.

Using his stock options, Morris was able to purchase the PFF stock for an option price of $7.38 per share, and then turn around and sell the stock for the then-current market price of about $36 per share. Good thing Morris used his options two years ago - at the close of trading on Friday, PFF Bancorp was down to $6.19 per share.

The records show that on 8/25/06, Morris purchased 6,000 shares of PFF stock for a total price of about $44,000 and sold the stock on the same day for $219,000. Then, on 8/28/06, he purchased 11,852 for $87,000 and again sold the same day for $427,000.

There was nothing wrong with these transactions that we are aware of. Morris was simply exercising options he had presumably been awarded as a board member. It does show, though, that one can do pretty well sitting on local boards, provided the company performs well.

With PFF stock currently in free-fall over its bad loans, is there a commensurate cost to board members for poor performance?