The battle for Baltimore Bancorp resumed yesterday as attorneys for insurgent stockholder Edwin F. Hale Sr. filed papers in U.S. District Court in Baltimore seeking to have many of the votes received by management thrown out.
Management of the parent company of the Bank of Baltimore is attempting to beat back dissidents -- led by Mr. Hale -- who are running for six of the 18 seats on the company's board of directors. The insurgents also want to expand the board to 28 members and fill the 10 new seats with their allies, giving them control of the board.
The court papers contend that management should not be allowed to vote shares against the Hale group's proposal to expand the board if the share owners did not specifically authorize a vote against the proposal.
Management's proxies were sent to shareholders before the Hale group formally made its proposal. Management has contended that if a shareholder granted management a proxy, company officials have the right to use that proxy to vote on any issues, including expanding the board, that came up after management's proxy material was mailed in early April.
The Hale slate says that's illegal. Daniel H. Burch, a proxy solicitor advising the dissidents, said that courts threw out a similar use of discretionary proxy authority in a case involving the Pittston Coal Co.
Benjamin F. Stapleton III, a lawyer for Baltimore Bancorp, said Wednesday that Securities and Exchange Commission rules allow blanket proxies when shareholder resolutions are proposed too late to allow management to solicit new proxies from shareholders.
The court action also seeks to invalidate votes cast between Wednesday's annual meeting and Tuesday, when the polls are now scheduled to close.
The company had planned to close the voting at the annual meeting, but the night before Baltimore Bancorp announced that it was extending the voting. On Thursday, the company said the SEC threatened enforcement action unless the voting was held open.
The Hale camp contends that management extended the voting in hopes of drumming up more support over the weekend. A spokeswoman for the SEC said the commission doesn't comment on its private discussions with companies.