Rebuffed firm went against Hale slate

June 11, 1991|By Timothy J. Mullaney

A New York investment firm that advised major shareholders to withhold support from Baltimore Blast owner Edwin F. Hale Sr.'s bid to expand the board of directors of Baltimore Bancorp had earlier been rebuffed in an bid to become an adviser to the slate of dissident shareholders led by Mr. Hale.

Providence Capital Inc. advised three institutional shareholders owning almost 1 million of Baltimore Bancorp's 12.8 million shares -- including Legg Mason Inc. of Baltimore, which controls 540,000 shares -- to withhold their support from a measure that would expand the company's board of directors to 28 members from 18.

Mr. Hale and one of his attorneys said the recommendation came only after Providence asked the Hale slate for $250,000 in exchange for the use of proxy materials the New York firm had already prepared that criticized the performance of Baltimore Bancorp Chairman Harry L. Robinson.

Those materials had been put together to support an unrelated proposal to set up a shareholder advisory board to represent shareholder concerns before the board of directors, said Dennis Gingold, a lawyer representing Mr. Hale.

"To me, it was a very simple matter," Mr. Hale said. "If I had gone with them, they would have recommended a vote for the Hale slate en masse."

David Eisner, Providence Capital senior vice president, denied that there was any conflict of interest between bidding for Mr. Hale's business and later advising third parties on how to vote their shares.

"Our discussions with Mr. Hale were extremely preliminary. We never made any representation to him that we could recommend adoption of his full slate," Mr. Eisner said. "We stand by the integrity of our work and our recommendation."

Passage of the proposal to expand the board was essential to the dissidents' plan to gain control of the company, the parent of the Bank of Baltimore, because only six of the 18 existing seats were up for re-election this year.

Providence felt that Mr. Hale's candidates weren't "impressive [enough] to justify giving control of the bank to him and his slate," Mr. Eisner said before the company's May 22 annual shareholders' meeting.

Providence did support six director candidates from the Hale slate, saying that current management hadn't earned a vote of confidence.

According to preliminary tallies,the proposal to expand the board won more than 58 percent of shares.

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