Lawyers Aggressively Soliciting Conversion Business
Meredith, Robyn, American Banker
WASHINGTON -- Lawyers seeking to drum up business are actively wooing the executives of mutual savings and loans, offering to make them rich if they change their charters to take advantage of looser regulations in certain states on initial public stock offerings.
"The lawyers do a lot of soliciting of thrifts around the country to get their business," said Eric Luse, a partner at Luse Lehman Pomerenk & Schick, a District of Columbia-based law firm that works on such deals.
Jonathan L. Fiechter, acting Director of the Office of Thrift Supervision, said, "In the last year and a half or so, there has been a group of individuals that have begun to market the advantages to management of converting from mutual to stock under the individual states rather than under OTS rules."
Spelling Out the Differences
An Illinois lawyer, Daniel C. McKay 2d of Vedder, Price, Kaufman & Kammholz's Chicago office, sent a letter to potential customers in February that contrasted Illinois' then-proposed looser laws with OTS rules. The regulations became final in June.
"The Illinois commissioner of savings and residential finance is in the final stages of publishing the conversion to stock regulations for Illinois savings banks. The final draft is in the process of review by a committee of which I am[a] member, and I thought you may be interested in some of [the] differences emerging between the savings bank regulations and the Office of Thrift Supervision" regulations, Mr. McKay, wrote.
"A savings bank converting to stock form will now know before the offering that at least 50% of the stock will remain in friendly hands (20% for ESOP [employee stock ownership] and management plans, 20% priority in the subscription offering for directors and officers, and 10% set aside for the stock option plan)," Mr. McKay pointed out in the letter.
"With the number of Illinois institutions that have converted to an Illinois savings bank to date, I would expect that many will take advantage of these new regulations when issued."
Calls to Reporter
A reporter was surprised to get four unsolicited calls over the course of two days from Washington lawyers and lobbyists who had heard American Banker was writing about such conversions.
All were active in the stock conversion business -- some structuring deals under federal rules, some under state rules -- and wanted to ensure that their profits would not be ended by bad press. …