THURSDAY May 19 Update: A court order, filed this morning by federal Judge Paul S. Diamond, requires Republic CEO Vernon Hill, his rival the newly reinstated Chairman Harry Madonna, and their allies, to “maintain the status quo” at least until May 26.
Together the rival factions, which had sued one another, “shall manage the affairs” of the bank, according to the order.
For the next week, no big changes, outside the course of daily business, will be allowed “unless unanimously consented in writing.” There will be no attempts to replace Hill as CEO or other top managers, and no changes to Hill’s new-branch plans. Regular “transaction of business” now requires that at least five of the seven board members approve.
WEDNESDAY: Two factions fighting for control of Philadelphia-based Republic Bancorp have agreed to a one-week cooling-off period, after federal U.S. District Judge Paul S. Diamond on Tuesday night declined to rule immediately on chief executive Vernon Hill’s demand for an order to reinstate him as board chairman.
Hill was ousted last week by four Republic directors, who also announced his replacement — past Republic chairman Harry Madonna — on May 13. The directors acted three days after Hill supporter Theodore Flocco died, breaking a 4-4 deadlock on the Republic board, and leaving Madonna’s faction with a one-vote majority.
But Hill in his complaint to Diamond argued that the vote lacked a quorum and that Madonna’s supporters had no authority to run the bank, which has 33 offices in the Philadelphia and New York metro areas.
Diamond wants the two sides to agree on their own rules for overseeing the bank, according to people familiar with the Madonna faction’s strategy. A spokesman for Hill and the bank did not respond to requests for comment on Wednesday.
The Madonna faction, backed by dissident shareholders including onetime Hill ally George E. Norcross III, is supporting a rival slate of directors at an as-yet unscheduled election, which would give them a clear majority on the board.
Norcross, once Hill’s vice chairman at the former Commerce Bancorp, now wants to replace Hill as Republic’s chief executive with former TD Bank executive Greg Braca. Norcross has said that he and his allies can raise cash to buy control of the bank and improve its performance, potentially boosting its languishing share price — and that Hill has failed to seriously consider the offer.
Norcross, Braca and other insurgents say the bank should spend less on new branches and improve its technology, which would boost profits. Hill supporters say the likely outcome would be the bank’s sale to an out-of-town company. It is the largest bank currently based in the city of Philadelphia. Once a banking center, the city lost tens of thousands of jobs as its major banks were sold to out-of-town companies after bank merger laws were liberalized in the 1980s.
Hill and his remaining board allies, accountant Barry Spevak and advertising executive Brian P. Tierney, whose clients include Republic, had asked Diamond, who is hearing the case in Philadelphia, to prevent Madonna and his board supporters from making any changes to the board of Republic’s subsidiary, Republic Bank, or from contacting employees as if they spoke for the bank.
Madonna’s supporters on the board include Andrew B. Cohen, a hedge fund investor; Lisa Jacobs, a Philadelphia lawyer whose clients include Madonna; and Harris Wildstein, a New Jersey businessman who co-founded the bank with Madonna in 1988.