Bank feud: Chairman Giles quits VNB with other directors
A feud over corporate governance compounded an already painful December for a major Central Virginia financial institution. Virginia National Bank has experienced a leadership shake-up that has seen nearly one third of the board of trustees quit including the chairman, Mark Giles.
"My resignation is effective immediately," Giles tells President Glenn Rust in a December 19 letter that followed an apparently contentious meeting earlier that day. Neither Rust nor Giles, who spent nearly a decade as the Bank's first president and who chaired the board since 2005, returned repeated telephone messages.
Two other board members, Ms. Claire Gargalli and Mr. Leslie Disharoon, also quit that same Monday in what the bank concedes was a disagreement over the composition of its board of directors. A fourth director on the 13-person board, Neal Kassell, resigned two days later for unstated reasons.
In recent days, the usual discussions of loans and strategic growth at the home-grown but publicly-held financial institution (VABK.OB) may have been compounded by the financial struggles of two board members and the death of the bank's longtime chief financial officer.
On December 3, Steve Perry, the 52-year-old CFO and chief operations officer since the bank's 1998 founding, lost a battle with cancer.
Meanwhile, Virginia National may be dealing with unpleasant questions about the financial dealings of its vice-chairman, Hunter Craig. As regular Hook readers know, Craig, having already extracted $11.7 million in secret state tax credits, recently commenced litigation attempting to extract another $19.5 million in the controversial credits to bail out a failed real estate speculation called Biscuit Run.
The key owners of the company that owned Biscuit Run prior to the property's December 2009 sale to the state as a park were Craig and his father-in-law and fellow VNB board member Wick McNeely. The two appear to owe another bank millions for the still-outstanding loan on the nearly 1,200-acre tract. In last year's proxy statement, the bank revealed that Craig and McNeely have pledged nearly all of their approximately $3 million each in VNB stock to an unnamed entity.
A phone message left with Craig was not returned, and phone conversations with departed board members Gargalli and Disharoon produced no information. However, according to a Form 8-K, a government-mandated disclosure of important events to company shareholders, the three board members who quit VNB Monday did so after disagreeing with other board members.
Giles submitted a typed resignation letter, while fellow board members Gargalli and Disharoon submitted short, hand-written resignations. Kassell's resignation was unrelated to the board disagreement, according to the federal document.
Board member William D. Dittmar Jr. has been tapped as the new chair.
Virginia National's stock was sold to the public in 1998 for $10 per share. After practically doubling within a year, the stock eventually retreated and then plateaued. It remained steady during the week of the shake-up at $16.90. However, after this story appeared online, the stock fell over 20 percent and settled at presstime on Tuesday, January 3, to about $14 per share.
A reporter's conversations with several analysts suggests that VNB presents an attractive take-over target at a level over $20 per share due to its high cost structure– the CEO alone takes in over $350,000 a year– and a strong loan portfolio. However, the analysts also noted that having two board members pledging away their stock and waging litigation against Virginia taxpayers harms the bank's reputation.
Another bank founded around the same time, Albemarle First, was eventually sold. Whether VNB has likewise pursued an acquisition has not been revealed, but its official public report indicates that the disagreement concerned the "composition" of the board of directors, a tantalizing hint that unease over allowing Craig to remain on the board could be a focus of the disagreement.
"I have seen things like this happen before when people disagree over selling a company," says one Charlottesville-based investment advisor. "It could also be related to the woes of one of their founders and big shareholders."
–updated 11:40am January 3 for print publicationAttached Documents: