Bank firm, dissident shareholders wrangle: Professional Bancorp's board faces challenge.

SANTA MONICA - A group of dissident shareholders who are engaged in a bitter fight to remove the board and management of Professional Bancorp Inc. have asked a federal court judge to delay the annual meeting so they can get their message out to other shareholders.

The dissident group of seven shareholders, who own 11 percent of the stock of Santa Monica-based Professional Bancorp, have asked Judge Kim McLane Wardlaw to delay the shareholders meeting from June 19 to early July so they can mail out their proxy statement to shareholders. Wardlaw had not issued a ruling at presstime.

That proxy statement contains a number of allegations from a lawsuit filed against the company by Dr. Martin Goldfarb, a Century City physician and one of the dissident shareholders. The lawsuit alleges that CEO Joel Kovner was involved in improper loan transactions and that Kovner has sexually harassed female employees and that the board is aware of and condones these activities.

Kovner and the members of the board, who collectively hold 33 percent of the stock, deny the allegations that they engaged in improper loan transactions. There has never been a claim of sexual harassment against Kovner, according to court documents.

"It's all lies," Kovner told the Business Journal outside the courtroom.

Professional Bancorp is the holding company for First Professional Bank, a bank with $300 million in assets which specializes in serving doctors and other health care professionals.

Replacements sought

The dissident shareholder group has asked shareholders to vote out the current seven directors and replace them with a new slate. If elected, the new directors would immediately remove Kovner "for cause," according to the dissident shareholders' proxy.

Skip Miller, attorney for the dissident shareholders group, which calls itself the "Shareholders Protective Committee," told Judge Wardlaw the group is concerned that the shareholder body will not receive the committee's proxy materials in time to vote at the June 19 meeting.

Miller said the group was delayed from mailing its proxy statement with its alternative slate of directors because of a dispute with management over whether the group could actually propose a slate for election to the board.

Company bylaws seem to indicate only nominees of the current board can run for election, Miller said.

He said that he was later informed by Professional Bancorp's counsel, Frank Merideth, that the dissident group could put forward a slate for election.

Miller said the dissident group's proxy was in the process of being mailed out the week of June 10. It was "very unlikely" that all shareholders would have time to receive the proxy, read it, vote and mail it back in time for the June 19 meeting.

Merideth, attorney for the current board and management of Professional Bancorp, said it was the dissident group's own fault that it was late in mailing its materials. "They tarried," he charged.

Merideth told Judge Wardlaw the company would incur at least $25,000 in new expenses involving mailing out new materials if the annual meeting were delayed.

He added that the current board wants the fight with the dissident group resolved as soon as possible. The board is concerned that allegations contained in the lawsuit and the proxy materials will be "in the public eye" and tarnish the bank's reputation.

Suit pending

In Goldfarb's federal court suit he alleges that the bank's CEO has engaged in sexual harassment of female employees and that directors have condoned his behavior and have engaged in self-dealing, including various improper loans.

The lawsuit alleges that the current board is not independent and impartial because directors have personally made significant loans to Kovner. It also alleges that Kovner and the board are overcompensated.

The board and Kovner deny those charges in court papers and in proxy materials mailed out to shareholders. "All of the bank's financial dealings with the directors have been on the same terms as persons with similar creditworthiness and are consistent with applicable federal banking regulations," the proxy states.

Kovner told the Business Journal that he doesn't know why the dissident group is trying to overthrow the board and remove him.

He said he believes a group of five "disgruntled former employees" who resigned from the bank in February are behind the move to replace the current board and management.