Driver Management may be prevented from voting its shares in a June 11 proxy contest at First United after the bank’s regulator determined that the activist violated state laws and referred the matter to the state’s attorney general.
On Thursday, Maryland Commissioner of Financial Regulation Antonio Salazar sent a letter to Driver, saying that the activist had violated the state’s rules when it acquired its 5% stake in First United last year by not seeking prior approval. The rule applies to those seeking to influence the direction or policies of a Maryland bank.
The Commissioner did not impose a penalty, instead sharing his verdict with the bank and the state attorney general for further action. However, Salazar noted that stock acquired in violation of the Maryland Code was typically prohibited from voting for five years. It was not immediately clear whether that would also invalidate Driver’s nominations, as First United has sought.
Driver slammed the regulator’s verdict, adding that the bank had lobbied the regulator in a monthslong campaign beginning at latest on November 1, 2019, when the bank’s lawyers wrote to the regulator requesting that it put the kibosh on the contest.
The activist said evidence acquired by a freedom of information request showed the bank “contemplated reporting other shareholders to regulators,” and “sought to hide its collusion with the Maryland Commissioner while publicly lying (including in proxy solicitation materials and a press release this morning) about the extent of its lobbying and coordinated actions with state regulators.”
“First United’s efforts to lobby the Maryland Commissioner to undermine corporate democracy represents an extreme example of entrenchment and a blatant misuse of corporate resources,” Driver wrote in an open letter to shareholders.
The activist added that the regulator had declined its request for a hearing and ignored legal opinions from the state attorney general that First United’s interpretation of the filing requirement was “off base.” It vowed to “vigorously defend” its rights in court and take “all necessary steps” to prevent First United from trying to limit its ability to vote its 5% stake at the annual meeting.
In a reaction to Driver’s allegations, First United said on Monday morning it did not “instigate, direct or control” the investigation, “nor did any of First United’s executives use their positions or relationships with trade associations to influence the investigation.” Driver previously suggested that First United CEO Carissa Rodeheaver could have used her position as chair of the Maryland Bankers Association to push the regulator to launch the probe.
First United swiftly rebutted Driver’s claims as “false narratives and misinformation.”
The bank had earlier issued its own presentation in which it warned investors that the activist’s “reckless and one-sided approach” pushing for a sale carried significant risk given the uncertainty in global markets and noted its steps to align executive compensation with shareholders’ interests, refresh its board, and keep the business on a solid footing despite the challenges presented by the COVID-19 crisis.