SANTA CLARITA — The fired president of Valencia National Bank is suing the bank and its board of directors for $2 million, contending that he was wrongfully ousted because he tried to collect delinquent loans from several board members.
Bank executives have said Robert Manley, 51, was fired June 1 because of declining earnings at the bank, the only locally owned bank in Santa Clarita.
Manley's lawsuit contends, however, that the bank's most significant financial problem was the unpaid loans and the costs of trying to collect them.
"I felt that the bank's actions were improper and, beyond that, done in very poor taste," Manley, a founder of the bank, said in a telephone interview Thursday.
Bank executives have conceded that the bank had a problem with unpaid loans to directors, and that directors with such loans were asked to resign, but said that had nothing to do with Manley's dismissal.
Banks commonly lend money to their board members on the same terms that customers receive. However, Manley stated in his lawsuit that he had complained since 1991 about delinquent loans to board members with no results. He said the situation has now cost the bank several hundred thousand dollars and is tarnishing its image.
Forty percent of the bank's "problem loans" were owed by five of the board's 12 members in March, 1993, not including one to the father of a board member, according to the lawsuit. Four of the five board members resigned. They were joined by another board member who reportedly disagreed with Manley's stance and whose loans became delinquent after he resigned.
Manley contends in his lawsuit that the bank was on the brink of receiving a formal regulatory order or censure from the federal Office of the Comptroller of the Currency until the directors with delinquent loans resigned. But the suit states that at least one current director has continued such practices, seeking special treatment for a delinquent loan to a relative.
"These actions are very serious and smack of our own 'Whitewater,' " Manley wrote in a March 23 memo seeking help from board President Louis Garasi, submitted as part of the lawsuit. "On several occasions," Manley wrote in the memo, he felt that he was "the only one that is promoting ethical conduct on the part of our Board of Directors."
The board members with delinquent loans were not identified in the lawsuit.
Garasi said in an interview that Manley's accusations are a smoke screen to cover the real reasons for his firing--declining earnings from 1991 to 1993 and a disagreement with shareholders over his management style. Bank stock worth $10 a share when the bank opened reached $14 several years ago, but now trades for $7 to $8.
Garasi declined to comment on the allegations in Manley's lawsuit, stating that the bank has not been formally notified of the suit, but said no current board member has an outstanding loan.
A press release issued by the bank Thursday states that it earned $127,413 during the first six months of 1994, compared with a loss of $141,009 in the same period a year ago. Garasi attributes the increase to recovery from the recession, saying earnings might have been even higher had Manley not presided over the bank.
The bank has 30 days to respond to the lawsuit after receiving it.
The suit names the bank and its eight current board members as defendants. Board members include Garasi, Eugene Burke, Charles Albre, Richard Keysor, Walter Fisher, Richard Patterson, Robert Nahabit and Joseph McKeon, brother of Rep. Howard P. (Buck) McKeon (R-Santa Clarita).
The freshman congressman is another of the bank's founders and served as chairman of the board of directors until he was elected to office in November, 1992. He is not named as a defendant in the lawsuit, although he said he knew about the delinquent loans and the related disputes.
He said the bank initially prohibited loans to directors until bank regulators told them "that it's not a good policy because you deprive the bank of some good business."
"Our policy was to never give a board member anything you wouldn't give somebody who just walked in off the street," McKeon said. "You couldn't give them a better interest rate, any kind of advantage. You had to bend over backward to make sure you weren't using the bank to help board members. It was tougher for board members than for others."
McKeon, who was involved in Manley's hiring but not his dismissal, said Manley had always had a rocky relationship with the board, which tolerated him when the bank was doing well, but decided to oust him when earnings dried up.
The bank is expected to name a replacement for Manley within a week, Garasi said. Manley has accepted a position as regional vice president for the Valencia branch of American Pacific State Bank, scheduled to open at the end of August.
Correspondent Mark Sabbatini reported from the Santa Clarita Valley and Times staff writer Alan C. Miller from Washington.