Bank Proxy Battle Turns Nasty

In trying to fend off an attempted coup by its former chief executive officer, Vineyard National Bancorp is now holding Norman Morales responsible for the mess it is in, according to a story in American Banker.

The $2.5 billion-asset company in Corona, Calif., is publicly blaming Morales for its mounting credit problems, saying that millions of dollars of residential construction loans that have gone bad were made on his watch.

Vineyard says it has been late in filing its annual report because Morales was lax in his oversight of its information technology policies. In addition, the bank is telling shareholders that the candidates Morales has nominated for its board are not qualified to be directors and that his campaign for their election "is a transparent attempt" by him "to return to power with the help of his friends and associates."

Morales resigned as the CEO in January, a week before Vineyard reported a $41.3-million loss for the fourth quarter, and he is waging an aggressive fight to regain control. Not content with the board's more conservative approach, he says his strategic plan for Vineyard includes beefing up its commercial and small-business lending to balance out its real estate and construction lending.

Proxy contests have become more common lately as bank earnings and share prices have plummeted, but observers say the battle at Vineyard is unusual because it is being led by a former CEO. Also, in most proxy challenges, the dissidents seek mainly to gain board representation, so they can have more say in the company's direction, but Morales has nominated six candidates, including himself, to replace the entire board.

The battle will not be resolved until the annual meeting - and one cannot be scheduled until Vineyard files its 10-K with the Securities and Exchange Commission.