Business

/

ArcaMax

Palace intrigue grips Banc of California

James Rufus Koren, Los Angeles Times on

Published in Business News

A year ago, the story of Banc of California was of a hard-charging chief executive eager to turn a fast-growing institution into a household name -- but fond of inside deals and potentially connected to a financier who has pleaded guilty to fraud.

But over the last few months, lawsuits filed by several former insiders have told a different version of the tale: one in which a handful of board members at the Orange County bank ousted CEO Steven Sugarman to shield themselves from scrutiny and then ignored allegations that included improper accounting, workplace drug use and sexual misconduct.

One of those lawsuits call the whole episode a "Machiavellian effort" to clean house of rivals and take over the bank. Another suggests that a current board member may have been in cahoots with an anonymous short seller who peddled the damaging allegations about the fraudster that kicked off the scandal.

In a detailed, point-by-point response filed Thursday, the bank said the lawsuits are filled with "baseless or meritless allegations" and are part of a plot by Sugarman and his "proxies" to restore his reputation and undermine the bank.

A spokesman for Sugarman said the filing amounts to the bank's directors following through "on their threats to retaliate against and defame Mr. Sugarman."

The legal face-off marks a continuation of what's been a tumultuous year and a half for the Santa Ana bank, which will soon have its name adorning the region's newest sports stadium, the Exposition Park home of the Los Angeles Football Club, an MLS expansion franchise.

 

The bank is being investigated by the Securities and Exchange Commission and recently underwent a boardroom and management shake-up related to the turmoil.

Robert Hockett, a Cornell Law School professor who specializes in financial services, said this level of palace intrigue reflects the bank's rapid growth into one of the largest banks based in Southern California even as it remains small by national standards, with about $10 billion in assets.

"It's a perfect petri dish," he said. "The stakes are high enough for things to matter, but the firm is still small enough that it can be controlled by a small number of people."

The latest and most explosive allegations about the bank came in a suit filed last month by Heather Endresen, a former managing director who ran the bank's Small Business Administration loan program.

...continued

swipe to next page
 

Comments

blog comments powered by Disqus