When is a lawsuit a lawsuit, and when is it a publicity stunt?
In the soap opera that the Battle of Baltimore Bancorp has sometimes resembled, it's an interesting question. For about six weeks now, incumbent managers led by company Chairman Harry L. Robinson and dissident shareholders led by Edwin F. Hale Sr. have taken their battle to different courts, the state ethics commission, the Federal Reserve and the U.S. Securities and Exchange Commission.
At each twist and turn, the two sides have claimed terrible injury and accused the other of callous law-breaking, even law-trampling.
But remember what the Gershwins wrote. No matter what the allegations are -- "it ain't necessarily so."
Proxy fights like this one for control of the Bank of Baltimore's parent company are in some ways more simple than they seem. Many of the complaints that the two sides have aired in court and before federal agencies over the last five weeks may have been made without much real expectation that anyone was going to do anything about them.
Many of the moves weren't made for the benefit of agencies like the Federal Reserve or the Securities and Exchange Commission at all, each of the rival factions says, at least when talking about the other side's moves. They were made by combatants who knew the moves had only a slim chance of success, but could still play well in the newspapers, a critical forum for the two sides to reach out to the estimated 14,000 shareholders who would decide their fate.
"Some of the lawsuits and appeals for federal inquiries in proxy contests can be done for the public relations value, or for negotiating leverage," said David Eisner, senior vice president of Providence Capital Inc., a New York investment advisory firm. "The SEC might not allow someone to say someone has done something wrong unless the other side has filed a lawsuit making the claim."
The reason for the posturing is simple. The point of a proxy contest isn't to win brownie points with judges or regulators. The point is to win. To win, you get a message out. And playing the game aggressively, pushing every complaint through every channel they can find, the parties can keep their side of the story in the news and get their message out to shareholders whose votes ultimately decide who controls the company.
If it makes the whole process look a little like a soap opera, so be it.
"The party that was more effectively able to use the press would win," said Dennis Gingold, a Washington attorney representing the Hale slate, which won a 60 percent vote for six seats on the company's 18-member board of directors and a majority vote for a proposal to expand the board to 28 seats, which could let the Hale group take control of the company.
Mr. Gingold said that his side's announced $500,000 budget for the proxy fight left it especially dependent on getting good press, though, like Baltimore Bancorp's lawyers, he insists that his side wasn't the one making moves for publicity alone.
"We don't have the ability to spend $22,000 a day on newspaper advertisements," he said. "We have to go through newspaper reporters. It was the only way. We don't have a $3 million to $4 million budget."
This proxy fight is especially unusual because it is so local. Baltimore Bancorp is listed on the New York Stock Exchange, but most of its stock is held by individuals in the Baltimore-Washington area. Even the institutions with big positions in the stock are concentrated in Baltimore -- T. Rowe Price Associates Inc., First Maryland Bancorp and Legg Mason Inc. are three of the biggest shareholders.
That has meant that there are no full-page ads and little coverage in The Wall Street Journal or The New York Times, the usual forums where proxy fights are duked out. Instead, it's been fought out in The Sun and The Evening Sun, as well as smaller Baltimore business publications.
Lawyers for both sides are reluctant to admit that they have taken steps for publicity value alone. But they admit that it's at least a side effect of what they do.
The Hale slate in particular is quick to accuse management of playing to the crowd. "I don't think they seriously expected relief on anything they did," Mr. Gingold said.
"We don't file suits that we don't think have a basis in law and in fact," declared Benjamin F. Stapleton III, an attorney for the New York law firm of Sullivan & Cromwell, which is representing management.
But Mr. Stapleton admits, "There are issues that we don't know where they're going to lead. You would hate to say, 'It's less than 50-50, we'll forget it,' and then read six months later about a case in which the [Federal Reserve] did something you weren't sure it would do."
Observers disagree on how much the theatrics moves votes. But at least one close observer of the proxy fight said all the tactical infighting could well move some shareholders' minds.