Magazine article American Banker

Sequoia of Calif. Accuses Shareholders of Slander

Magazine article American Banker

Sequoia of Calif. Accuses Shareholders of Slander

Article excerpt

A small San Francisco bank has accused a group of shareholders of slandering the bank in order to take it over and use its deposits to fund high-risk subprime lending and factoring operations.

In a lawsuit filed last month in the California Superior Court for San Francisco County, Sequoia National Bank alleges that the group of five shareholders, including one of the bank's directors, Paul Van Etten, falsely claimed to other shareholders that the $43 million-asset bank is grossly mismanaged.

Sequoia says that the group launched a defamatory campaign to depress its stock price, and that they attempted to coerce shareholders to sell their positions to the group. The bank also alleges that the group plans to merge Sequoia with a mortgage company and a factoring business, which are owned by some of the shareholders and which the bank claims engage in high-risk operations.

Peter Behr, one of the defendants, said that his group has been soliciting shareholders, and that its goal is to take over the bank and make it profitable. He also said the group has portrayed Sequoia accurately. "The results of the bank under current management ... are disappointing."

Sequoia has reported eight straight quarterly losses, most recently a $176,000 loss for the third quarter, according to the Federal Deposit Insurance Corp.

Joe Garrett, Sequoia's president and chief executive officer, would not discuss the bank's performance before his arrival in August 2000, but he said last year's losses stemmed largely from a $270,000 increase in loan-loss provisions, which he said was necessitated by larger-than-expected loan growth. …

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