Today the loudest, liveliest, most personal drama of Baltimore's business year will end. Or maybe it will end next Tuesday. Or the Battle of Baltimore -- Bancorp, that is -- might spill over into the courts.
Or it might spill over into a year of boardroom wrestling, as insurgent shareholders gain a minority of board seats -- but not the majority they seek -- and both sides jockey for position, anticipating another proxy fight next year.
In other words, today is the annual shareholders meeting of Baltimore Bancorp, scheduled for 10 a.m. at the Sheraton Inner Harbor Hotel. It should be fun.
"It gets curiouser and curiouser," said an executive at a competing bank holding company, who asked not to be named. "It's like Alice in Wonderland. Who said banking was boring?"
Baltimore Bancorp's management, led by Chairman Harry L. Robinson, is trying to foil a challenge led by Baltimore Blast owner Edwin F. Hale Sr. Mr. Hale wants to defeat the six directors running for re-election, expand the board to 28 members from 18 and fill the 10 new seats with candidates he recruited. Late yesterday, there still wasn't a clear sign of how it would turn out.
"You won't find that out [today]," said Jerome P. Baroch, executive vice president of Baltimore Bancorp, the parent company of the Bank of Baltimore. Management said last night that it is holding the vote open until next Tuesday to let shareholders digest a ruling by the Federal Reserve yesterday and to clear up the confusion of shareholders who have voted more than one proxy ballot.
Mr. Baroch said the bank held the vote open to "allay concerns" of the U.S. Securities and Exchange Commission about the fact that management has sent out two sets of proxy ballots and the Hale camp has sent out another. Mr. Baroch said that the commission is concerned that shareholders might be confused by all the paper.
The company has said that some shareholders voted a management proxy for the incumbent directors, then accidentally negated their vote by sending a second ballot to the Hale camp that voted against the Hale slate. That ballot effectively changed those shareholders' vote on management's choices from a yes to an abstention, Mr. Baroch said.
A third set of ballots sent by management let shareholders correct that mistake, he said. Only the last ballot a shareholder casts counts.
Mr. Baroch said that the SEC's concerns had nothing to do with a protest the dissidents lodged with the commission Monday. The Hale slate asked the SEC to throw out all of management's votes, contending that management's proxy statements and newspaper advertisements misrepresented the records of the Hale slate.
The dissidents said the company was fudging. "No one made them do it [delay the vote], to our knowledge," said Daniel H. Burch, executive vice president of a proxy solicitation firm retained by Mr. Hale. "They did it because they were losing."
Mr. Baroch said that it will take days after the polls close to count the votes and make sure that all of the proxies are valid.
Two major shareholders, First Maryland Bancorp and Legg Mason Inc., aren't saying how they will vote. But a New York investment bank advising Legg Mason and two other shareholders, who collectively own 1 million of Baltimore Bancorp's 12.8 million shares of stock, said yesterday that it has advised those clients to vote for six of Mr. Hale's slate of candidates.
Providence Capital Inc. said it urged Legg Mason, which controls 540,000 shares through its mutual funds; the California Public Employee Retirement System, which owns 75,000 shares; and Sun America Asset Management of New York, which owns 375,000 shares, to vote against expanding the board, said David Eisner, senior vice president of Providence.
"This management and this board don't deserve a vote of confidence," Mr. Eisner said. But, he added, "we don't believe the slate [Mr. Hale] put together was overly impressive to justify giving control of the bank to him and his slate."
Mr. Eisner said there's no guarantee that the clients will vote the way Providence recommends. Mr. Burch said the California pension fund has voted as Providence urged and that he expected Sun America to do the same. Mr. Burch said he is still hopeful that Legg Mason will vote for the entire Hale slate. Legg Mason declined comment.
If those 1 million shares prove to be the swing votes, in an election where Mr. Burch said 10 million shares are expected to vote and it will take at least 5 million to win, that could leave the dissidents with a minority position on the company's board.
If the dissidents win a majority vote for expanding the board, but less than 80 percent, state judges could decide who gets control of the company. The sides disagree over whether Baltimore Bancorp's bylaw requiring an 80 percent vote is valid under Maryland law.
The insurgents say it takes only a majority, and Mr. Burch conceded yesterday that an 80 percent vote for the Hale slate "isn't in the cards."