In an amended filing with the U.S. District Court, Baltimore Bancorp has charged that dissident shareholders made false and misleading statements to stockbrokers who control large blocks of the bank holding company's stock.
Yesterday's filing comes a day after preliminary results of shareholder voting showed that the dissidents won a clear majority and that six of their 16 nominees apparently will be elected to the board. However, a federal judge will have to rule on whether a motion to enlarge the board from 18 to 28 -- which also passed by a majority -- goes into effect despite a provision in the company's bylaws requiring an 80 percent vote on such matters.
If the judge rules that the enlargement motion was properly adopted, the dissidents would control 16 of the board's 28 seats. The dissident group is headed by Edwin F. Hale Sr., a Baltimore truck and shipping executive and owner of the Baltimore Blast soccer team.
The new court filing adds to a suit filed May 20 that charged the Hale group with misleading statements by comparing Baltimore Bancorp with some of the top performing banks in Maryland.
The amended case charges that the Hale group met with stockbrokers on May 17 and made a variety of false and misleading statements about the bank's loan portfolio, expenses and regulatory examinations.
Because of those statements and other alleged misrepresentations, Baltimore Bancorp is asking that the proxies received and ballots cast in the recent election be invalidated and that a new vote be held.
As part of the new filing, Baltimore Bancorp has asked that officials from T. Rowe Price Associates Inc. and Legg Mason Inc. give depositions in the case. Price and Legg, both prominent Baltimore investment companies, control large blocks of Baltimore Bancorp stock.
"It's their last desperate effort to persuade a court that a majority of shareholders should not select the board of directors," said Dennis M. Gingold, a lawyer for the Hale group. "It's kind of hard to mislead a stockbroker," he said.
Gingold said the charges were ironic in light of a May 18 letter from the Securities and Exchange Commission to Baltimore Bancorp's lawyers. The letter raised objections to the bank's advertisements questioning qualifications of members of the Hale group. The letter was released to the group under a Freedom of Information request, Gingold said.