Baltimore Bancorp's top management and board of directors "manipulated" their May 1990 rejection of First Maryland Bancorp's purchase offer to protect their own jobs and financial interests at stockholders' expense, according to fresh allegations in a federal lawsuit.
The suit claims that Harry L. Robinson, Baltimore Bancorp's former president, and the directors breached their fiduciary duty to protect stockholders by negligently failing to explore whether First Maryland would negotiate a higher price than the $17-a-share tender that was on the table.
At the time, many of the directors received compensation from law firms, development companies and other businesses based in part on their "continuing relationship" with the bank, the suit claims.
It also claims that Baltimore Bancorp's officers and directors, the defendants in the suit, had used the bank "as their own personal money tree to obtain loans for themselves and their companies, firms, clients and affiliates."
The suit does not detail those loans. But it said the total increased from $60.13 million in 1989 to $66.27 million in 1990, which represents more than 28 percent of "consolidated stockholders' equity" in the bank.
The new allegations are in a massive amended complaint filed in U.S. District Court in Baltimore by local attorney Charles J. Piven on behalf of Baltimore Bancorp stockholder Frank Tischler, a Parkton investor and lead plaintiff in the class-action suit.
Piven filed the 138-page amendment 10 days ago under seal, to keep sensitive information out of public view. But Judge Marvin J. Garbis unsealed it yesterday after lawyers representing the bank and directors said they did not object.
The amended complaint is an attempt to bring Robinson and 19 other defendants, chiefly former bank officials and board members, back into the lawsuit. Most of the defendants were ousted from the bank when maverick businessman Edwin F. Hale took it over in a proxy battle last summer.
Garbis threw out all the individual defendants in Tischler's suit last April. But the amended complaint prompts him to reconsider that decision based on new information discovered since the original complaint was filed about a year ago.
The amended complaint claims that Robinson "manipulated the corporate machinery of Baltimore Bancorp" and orchestrated a series of critical meetings on May 16, 1990, "to assure rejection of the First Maryland offer."
The amended complaint details four separate actions that day. First, Robinson told stockholders in the morning, at their annual meeting, that "Baltimore Bancorp is not for sale."
At 11:30 a.m., after the stockholders' meeting, the board voted at an "organizational meeting" to reject First Maryland's $17-per-share tender offer.
Robinson, the suit alleges, came to that meeting with press releases which said the board had rejected the tender.
At noon, the directors held a "special meeting" at which financial advisers from Alex. Brown Inc. told them that Baltimore Bancorp was extremely healthy, that its stock was worth far more than $17 per share, and that First Maryland could afford to pay a higher price.
Before that meeting ended, the directors formally approved a resolution rejecting First Maryland's tender.
Later that day, Robinson issued the press releases because First Maryland's offer was "inadequate."
Tischler contends that Baltimore Bancorp's management not only misstated the bank's financial health, but misled Alex. Brown officials by supplying the investment firm with information that "severely limited the scope of its review."
Alex. Brown is named as a defendant in the suit, however, because its officials allegedly failed to check out the information Robinson gave them to ensure its accuracy.
Robinson also negligently misled stockholders by stating that the bank was not for sale at any price, and the directors merely rubber-stamped his remarks by their no-sale resolution without investigating the facts, Tischler claims.
In addition, the amended suit seeks certification of a new "holder class" of plaintiffs that would include "all persons who owned Bancorp common stock on Nov. 1, 1990," the day the bank announced its final rejection of First Maryland's offer.
Garbis already has certified the suit as a class action involving people who bought Baltimore Bancorp stock between May 16, 1990, the day the bank first rejected First Maryland's tender, and Nov. 1, 1990.
The suit seeks damages from all named defendants in the amended complaint for the difference between the $17-a-share First Maryland offer and $5.12 1/2 , the price at which Baltimore Bancorp's stock closed Nov. 1, 1990.