SAN DIEGO — For the first time in 2 1/2 years, Fabulous Inns of America shareholders are scheduled to gather and elect a board of directors.
But in keeping with the yearslong struggle for control between different--and changing--factions, the Nov. 5 shareholders meeting is steeped in controversy and almost certain to result in yet another round of lawsuits and court battles.
Last week, Superior Court Judge James Malkus granted a request by Chula Vista investor Frank Ferreira and ordered a special shareholders meeting.
For more than two years, Ferreira had supported and was a confidant of Chairman Jeffrey Krinsk and President David Yardley in their effort to oust the previous management, which they charged with self-dealing and insider trading.
But in August, after the company reached an out-of-court settlement with the ousted group, Ferreira broke ranks with Krinsk and Yardley. Each side charged the other with trying to take over the company, lawsuits were filed, and the anticipated calm that would allow the company to operate unimpaired by controversy and court hearings never materialized.
Krinsk and Yardley claim that Malkus' order for a special shareholders meeting doesn't give the company enough time to notify stockholders and solicit proxies in accordance with Securities and Exchange Commission regulations. As a result, the company will march into federal court next Tuesday and ask U.S. District Judge Judith Keep to rule on the validity of the meeting.
Krinsk said: "I will fulfill the directives of the (Superior) court, but I won't vote my shares or participate in a process that's clearly violative of federal securities laws, and I would counsel others to do likewise."
Fabulous Inns' outside counsel has "advised us that the results of the election won't be valid," Krinsk said.
Ferreira has been prohibited by Malkus from voting any shares he accumulated after Aug. 15, which means he can vote about 20% of the outstanding company stock.
Ferreira owns about 30% of Fabulous Inns' stock.
Also uncertain is the status of about 200,000 shares held in "street name" by stockbrokers. Brokers will not be able to track down the individual holders of those shares in time to receive their proxies, according to an analyst who follows the company.
"No broker will vote them . . . and they don't want to stick their necks out," the analyst said.