Flow General Inc.'s two top officers resigned yesterday in a major shakeup that insiders said they hope will alter the course of the troubled McLean firm.
Flow General's board of directors accepted "with regret" the resignations of Joseph E. Hall, president and chief executive officer, and Thomas E. Bazemore, chairman.
The resignations came late yesterday during a scheduled board meeting, described by some sources as the climax of a week of arguments over the future of the company and the fate of its leaders.
When the meeting ended yesterday, Hall's new job was to "continue in association with Flow General in a role as consultant," according to a company press release, and Bazemore was named chairman of the board's executive committee.
Grant C. Ehrlich, a founding director of Flow General, took over as board chairman and acting chief executive officer. He will hold the chief executive's post for "an unspecified interim period."
Harris W. Seed, another founding director, assumed the newly created position of board vice chairman. Neither Ehrlich nor Seed would comment on the Hall and Bazemore resignations, other than to say, in the case of Hall, that the resignation was "accepted with regret."
Ehrlich spoke of an "Ehrlich-Seed team," which he said would "continue the type of growth and success we have known in the past.
"This commitment will be most immediately shown by our aggressiveness to combat any sense that we will drift for any period of time as a result of the changes announced today," Ehrlich said. He said the reconstituted board "is recommitted to moving the company more swiftly to achieve success."
Success has been an elusive commodity for Flow General in the past year, during which the company experienced ebbing profits, rising legal problems and an erosion of its once blue-chip image.
Flow General reported a net loss of $1.35 million for the quarter ending Dec. 31, 1982--the company's latest reporting period and its third consecutive quarter in the red. By comparison, Flow General had profits of $2.35 million (28 cents) in that quarter of 1981.
The bulk of the latest quarter's loss reflected a $1.68 million offer to settle a class-action suit brought by two Flow General stockholders. The company said it would write off $1.2 million of the proposed settlement after taxes.
The shareholders accused Flow's senior executives of engaging in inside trading. The stockholders said company officials misled them about the implications of a federal investigation into a Flow General contract with the Army, allowing senior executives to sell their stock in the company before its value plunged.
As a result of the federal probe, a Flow subsidiary, General Research Corp., pleaded guilty on May 24, 1982, to charges that it gave jobs to two Army procurement officers in order to win a $2.6 million computer contract. General Research paid a $30,000 fine to settle the case, which also resulted in an Army move to cut the flow of future defense business to the McLean company.
A separate suit filed against Hall by stockholder Milton Small is pending.
In recognition of past and current legal problems, the board also created a general counsel post, to be filled by Charles R. McCarthy Jr. "The board's desire is to have an appropriate legal management to address an orderly resolution of various legal considerations the company has recently confronted," the company statement said.
Ehrlich said last night that his "first priority will be to establish the sound financial footing that will be necessary to fully exploit all the opportunities for future profitability" of the company.
Neither Bazemore nor Hall could be reached for comment last night.