A securities firm executive testified on behalf of Riggs National Bank yesterday that disclosures made by multimillionaire Joe L. Allbritton in his attempt to seize control of the bank were a "woefully inadequate" basis for shareholders to use in deciding whether to sell their stock.
Martin J. Whitman, president of a broker-dealer firm in New York, said later that there were no general rules requiring the more detailed disclosure he said was necessary, but he maintained that the information might be material in the Riggs takeover attempt.
The testimony came in the first day of a hearing on an attempt by the bank to bar Allbritton's efforts to gain control of the city's largest financial institution. The hearing resumes today.
Yesterday both sides reiterated arguments, with Riggs lawyers alleging that Allbritton's disclosure of his financial status and plans for the bank's future was inadequate, and Allbritton's attorneys denying the charges.
Bank attorney Fred Vinson told U.S. District Court Judge Norma Holloway Johnson that Allbritton intended to form a bank holding company with Riggs and use it to help pay off the $70 million debt he will incur if he acquires 35 percent of Riggs stock.
"It's the old story of the fish swallowing the whale and using the whale's money to pay for the acquisition," Vinson said.
Vinson also argued that Allbritton failed to give shareholders enough information to determine whether he could service the debt incurred. Vinson was careful to explain that he was not arguing that Allbritton could not service the debt, just that shareholders had no way of knowing.
In fact, papers filed by Allbritton's attorneys gave the net worth of the former owner of the Washington Star, whose financial empire spans California, Texas and Washington, as about $200 million, and argued that the debt would not be a substantial burden.
"We have nothing to hide and will continue to hide nothing," said Allbritton's attorney, Jeffrey Gleckel. But he added that Allbritton resented disclosure laws being used as a tool to protect incumbent management and as a delaying tactic.
In arguments, in briefs filed with the court and in the testimony of expert witnesses, the two sides in the battle for control of Riggs offered sharply different views of the world.
During the hearing, Riggs attorneys emphasized that stockholders may have an interest in the long-range health of the institution in which they invest, a view disputed by Allen C. Greenberg, chief executive officer for Bear Stearns, who testified on behalf of Allbritton.
"Every cutomer now, regardless of size, wants to make money," he said. Greenberg disputed the bank's contention that shareholders might be concerned over Allbritton's ability to handle the debt incurred in the stock purchase. Allbritton has offered to buy at least 600,000 a shares of Riggs stock at $67.50 a share, a price substantially above the level at which the stock was trading before the Allbritton offer. The offer is already oversubscribed, with Riggs' attempts to shoot down the tender offer the only apparent barrier to Allbritton's success.
"I don't think they'd be concerned," Greenberg said. "Telling him how to finance it would be like telling Babe Ruth how to hold a baseball bat."
Greenberg conceded that his firm has a substantial financial interest in the success of Allbritton's offer. If the tender offer is accepted and an estimated 700,000 shares are acquired, the investment banking firm stands to profit $140,000.