While Morton A. Bender cooled his heels for four hours yesterday in the lobby of the Mayflower Hotel waiting for Independence Federal Savings Bank's delayed annual meeting to convene, a group of his fellow shareholders was upstairs cajoling a wealthy New Orleans investment banker into keeping Bender from exerting more control over the District's only black-owned thrift.
It appears that they succeeded, at least for now.
Yesterday's shareholder meeting was like many others held by Independence in recent years, one marked by delays, intrigue, confused rumors, and furtive conversations in quiet corners and back rooms. Yet ultimately the day belonged to shareholder Harold E. Doley Jr., whose last-minute decision to vote against Bender's board nominees probably swung the election in management's favor.
Bender, who is white, has been trying to gain control of Independence for three years through proxy votes and by buying stock. But New Orleanian Doley, the first black businessman to own a seat on the New York Stock Exchange, said that despite his dissatisfaction with Independence's financial performance, he believes it can thrive as an independent black-owned financial institution.
"A minority bank in a predominantly minority city should have an impact," Doley said. "It should have a place."
Independence board Chairman Carolyn D. Jordan said it was her "guess" that a management-sponsored slate of directors gained two seats on the nine-member board, while Bender was able to elect only one of his two director nominees. The vote will not be officially tallied until today, but several insiders said the likely result is that the board will be split between four anti-management directors and five pro-management directors.
Several sources, who spoke on the condition of anonymity because the negotiations were private, said Doley agreed to vote his and his clients' shares for the management slate of directors after several hours of negotiations between him and Jordan over lunch at the Prime Rib restaurant and in a private room at the Mayflower. The shareholders meeting had been scheduled for 11 a.m., but because of Jordan's absence, it was rescheduled for 3 p.m.
"It was not an easy decision," Doley said. "Our hope is that when the gavel falls, the current management will have a great opportunity to grow this bank. In the end, we made a value judgment to support management."
Neither Jordan nor Doley would comment on their discussions or on speculation by some shareholders that a Jordan-backed group of black investors made an offer to buy Doley's shares. Doley's firm and clients he advises own about 12 percent of the thrift, which makes the Doley block the third-largest Independence shareholder, after Bender's 21 percent stake and a 13 percent stake held by the widow of William B. Fitzgerald, the thrift's founder.
Independence's management and Jordan portrayed the vote as vital to maintaining the thrift's black-owned heritage. Bender already has two representatives on the board. If he had another two seats, his four directors and Robert Isard, a fifth director who Independence said has similar views as Bender, would have been able to exert effective control over the thrift.
"I'm from New Orleans, so I think in terms of levees," Doley said of his decision to support management. "At some point, you have to build up the levees and stop retreating and hold your ground. At some point, you have to stop retreating and start to build."
Yesterday's proxy battle was only the latest round of internal strife since Fitzgerald's death in 1998. Fitzgerald assembled a diverse group of shareholders to found Independence in 1968 to make home and student loans in the predominantly black neighborhoods of the city that had historically been ignored by mainstream banks. At the time of his death, the thrift had $268 million in assets and was among the most profitable community banks in the region.
Yet even as several of the region's community banks have grown significantly in recent years -- Washington is one of the best commercial and consumer banking markets -- Independence has shrunk.
The past four years have been marked by repeated proxy battles; huge legal bills; litigation involving the Washington Teachers Union, a depositor that was embroiled in an embezzlement scandal; and a steady erosion of its customer base. On June 30, it had $166 million of assets and had lost money in each of the previous three years.
Bender began buying stock in 2002 and succeeded in electing two directors onto the board in 2003. Since then, he has engaged in a full-court legal and financial press to gain control. In all, he has spent $5 million to buy his 21 percent stake in Independence.
Bender has applied with federal regulators to buy at least 51 percent of Independence. His first application to buy control was rejected by regulators last year after another thrift Bender owns, Rockville's Colombo Bank, was cited for violating several banking regulations.
Bender repeated yesterday that his only goal is to improve a "wasted bank" by replacing its management and board of directors. But Independence's management, led by Jordan and chief executive Thomas L. Batties, says Bender's proxy fights and public trashing of the institution have been a primary reason for the bank's problems.
"We've been in a dogfight," Jordan said. "We want to build this into a billion-dollar institution and expand into new areas like Prince George's. But it's hard when we've been under constant attack."
Bender's lawyer, meanwhile, said he challenged two procedural matters during the vote, which could ultimately be grounds for a lawsuit contesting the election. "It was a very unfair process," Robert L. Freedman said. "But we want to see the results of the election before we decide what to do next."