BANK MOVES TO BLOCK TAKEOVER
Six Rivers National Bank issued what's
known in financial circles as a "poison pill" Oct. 1 in an attempt
to ward off any hostile takeover attempt.
"It's not unusual," said Will Kay, chairman of the board of directors, last week. "Thousands of companies enact `shareholders rights agreements' each year. It allows the board the discretion to look at all potential offers to purchase the company.
"If you get a hostile approach, it limits the amount of stock that any shareholder can purchase to 10 percent. If it's triggered, it allows current shareholders, excluding the hostile shareholder, to purchase shares at a discount, basically half price," Kay said.
"The idea is to discourage hostile advances but it in no way affects reasonable offers to purchase."
The move was the latest in a series of actions taken by the Six River Bank board in an attempt to restore public confidence following the September announcement of the write-off of $1.1 million in bad debt. The debt was due to a series of loans made to Northcoast Hardwoods Inc. of Arcata, manufacturers of hardwood flooring, moulding and other products, which declared bankruptcy late last year.
All loans made by the bank to Northcoast Hardwoods, Straightline Investment Co., or Matt Galt, who was a principal in both companies, were secured by either equipment or land. The bank still holds the first deed of trust on a 21-acre parcel off Samoa Boulevard in Arcata. A foreclosure hearing is scheduled for later this month, according to Kay.
Ironically bank officials hope to recover most, if not all, of the money loaned on the projects including interest up until the bankruptcy declaration. But bank regulations forced Six Rivers to revalue assets in the meantime.
"It's absolutely mandatory, as soon as a financial institution recognizes a loan is in trouble," Kay said. "In spite of our being optimistic, we had to restate (earnings)."
The equipment is valued at $1.5 million and the land at $3 million to $5 million, according to Kay. The bank's total loans to the two companies and Galt was $1.8 million.
The bank was preparing to foreclose in September when the original property owner, who was in second position as a secured creditor, filed first.
"He foreclosed on his interest and wiped out all the (secured and unsecured) people below him," Kay said. Once the bank forecloses on its loans, the holder of the second deed of trust can maintain his ownership interest in the property by paying the amount owed the bank to date and then resuming payments to the bank.
"If the second deed holder does not `cure' the default, then he will get wiped out," Kay said. Once money is recovered, the bank would then restate its earnings in a positive direction.
Several individuals who lost their unsecured investments by the foreclosure action went public with a grievance against Six Rivers Bank last month.
Four of five borrowers who received personal loans from the bank in order to invest in Northcoast Hardwoods Inc. accused the bank of illegal lending, fraud and forgery, charges bank officials deny.
Early this year the bank moved to collect on loans for nonpayment of debt against Timothy and Paula Crowley of Fortuna, Mitchell and Maggie Tonini of Fortuna, Gary Johnston of Eureka and Frank Nemetz of Red Bluff. The investors countersued, but in June a judge ordered arbitration. A mutually acceptable arbitrator has yet to be found.
The bank had loaned the four investors $200,000 each and a fifth investor $100,000 with the understanding that they were personally investing in Northcoast Hardwoods. Bank directors later "repurchased" $400,000 of the loans when it became apparent the amount was over the federal limit.
"What happened was that by virtue of the interrelationship of the investor/borrowers, Northcoast Hardwoods and Straightline, in aggregate, we exceeded our lending limit," Kay said.
"We viewed the loans to the individuals as independent (transactions), but once we understood how regulators looked at it, we repurchased the loans."
Since that time the bank has revised its policy on aggregate lending.
The bank is hosting an informational meeting for local investors and community leaders Oct. 15 at the Eureka Inn.
Pepper spray used again
One year after Humboldt County law enforcement officers used pepper spray to speed the arrest of non-violent demonstrators resulting in a loud public outcry and lawsuit Sheriff's Department deputies have used the stinging agent again.
Three female Earth First! protesters were daubed with pepper spray on Oct. 7 and 8 near Grizzly Creek State Park, the site of a blockade established by environmentalists in response to the death of activist David Chain. After Chain was killed by a falling redwood Sept. 17, the Earth First! blockade was set up on a logging road to prevent Pacific Lumber Co. personnel from accessing the timber harvest site. It was removed by law enforcement in response to complaints from the landowner and neighbors.
Sheriff Dennis Lewis authorized use of the controversial agent as attorneys prepare to return to U.S. District Court in San Francisco for a Nov. 16 trial on the matter and the California Peace Officers Standards and Training commission readies to adopt new guidelines allowing use of pepper spray on demonstrators at its Nov. 5 meeting. (The first pepper spray trial ended in a hung jury.)
Following the Oct. 7 raid at Grizzly Creek, Lewis said he was confident pepper spray is a proper law enforcement tool. Meanwhile, the investigation into whether Chain's death was intentional or accidental is continuing. Sheriff's officials have said they will turn the results of their investigation over to the district attorney, who will make a final decision on whether any charges would be filed against the logger who felled the deadly tree.
Show me the money
Candidates for Superior Court judge and county supervisor have raised nearly a quarter million dollars for their campaigns, according to expense reports filed Oct. 5. The most expensive contest to date is the county-wide race for judge. Candidates Eris Wagner and Chris Wilson have each dipped into personal funds to loan their campaigns more than $20,000 each.
Wagner raised $78,538, with gifts totalling $8,500 from her mother Janice Slack, brother Rick Slack and the Slack Family Partnership, owned by Wagner and her siblings. The family partnership also loaned the campaign $8,500, and Wagner's late father, Fred Slack, loaned $5,000.
Other large contributors included Eurekans Raymond and Pauline Wickel ($2,000), attorney Rory Hanson ($500), physician Robert Mott ($750) and Don Allen, owner of Humboldt Bay Packers ($1,000).
Christopher Wilson's campaign committee raised $64,417, with 10 contributions of $400 or more from attorneys and law firms, including John Stokes ($500), Scott, Scott, Robinson and Pavlich ($1,000), Pacific Justice Center ($1,000) and Jason Singleton ($800). Wilson received his largest contribution ($9,000) from his brother-in-law, Scott Esparza, a Ventura businessman.
In the race for 4th District supervisor, incumbent Bonnie Neely has raised $39,597, including $3,500 from Simpson Timber Co. and $5,000 from Pierson Building Center. Other $500-plus contributors to Neely: Glenn & Shelle Golden, Harvey Harper and NorCal Waste Systems.
Eureka City Councilman Lance Madsen gathered $26,644 to fund his bid to replace Neely. He carried over more than $8,000 from his 1994 council campaign and loaned his supervisorial campaign $5,000. Madsen's report listed few large cash contributions but mentioned more than $5,000 in non-monetary gifts, including $1,143 worth of jewelry from his own store, Allure Jewelers, for a raffle.
In the race for 5th District supervisor, challenger Sara Senger lagged far behind incumbent Paul Kirk in fund raising. Kirk raised $20,804 while Senger collected $8,185.
Kirk's large donors included Guynup Logging
($450), physician Carl Stevenson ($500) and Bill and Geri Heyne, owners
of the View Crest Lodge in Trinidad ($500). Senger loaned her campaign $1,000,
and she has received donations of $198 from attorneys Larry Eitzen and John
Stokes. (Senger won't accept donations larger than $99 per election, primary
and general, and Kirk is limiting his contributions to $250 per election.)
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