SAN BENITO - First Community Bank's board chairman will be in court on Friday seeking to stop other board members, including the wife of Harlingen's mayor, from taking control of the bank.
According to a motion for an injunction, the bank's board of directors met on Feb. 14 and voted to change the corporation's bylaws and to issue an additional 35,000 shares of stock, which four board members would buy at $55 per share, to raise almost $2 million.
First Community Bank's chairman of the board of directors Robert Dunkin then filed a lawsuit claiming that the board members' action is "an illegal conspiracy" that breaches fiduciary responsibility since the price of the new shares is below market value and dilutes the value of other stockholders' shares.
In addition, the lawsuit claims that the board members are enriching themselves in violation of state law against self-dealing by fiduciaries, and are motivated by greed.
The $55 price is below market value, the lawsuit states, and the Feb. 14 board meeting was called with only 24 hours' notice and at a time when the board members knew Dunkin would be out of town.
At that Feb. 14 meeting, the bank's directors also voted to amend the corporation bylaws to require a 75 percent vote by stockholders to remove any member of the bank's board of directors, and to change how shareholders' proxies can be voted.
Dunkin is seeking punitive damages and attorney fees from the four board members.
Among the board members who voted to issue the stock and change the bylaws are Anita Simmons Boswell, wife of Harlingen Mayor Chris Boswell; her father, Cecil Simmons; her cousin Leonard Simmons; and First Community Bank president Michael Scott, according to a copy of the certificate of corporate resolution filed in court.
Dunkin said Wednesday that board member George Labar also voted to issue the new stock and change the bylaws but he did not purchase any of the new shares, and board member Gilbert Garza voted not to issue the stock.
A statement from Dunkin's attorney Rollins Koppel states that Dunkin is trying to "protect the rights of all shareholders of the First Community Bank, which he has headed for over 29 years since its organization."
The statement continues, "This action was initiated reluctantly to avoid immediate and irreparable injury to the bank and all of its shareholders for all the reasons shown in the documents filed in support of his application for damages and injunctive relief.
"Evidence in support of his position will be presented to the court at the hearing to be held Friday morning," Koppel states.
Dunkin will be able to vote 54 percent of the proxies at the Feb. 25 stockholders meeting, Koppel added.
The four directors are being represented by San Antonio attorney Alex Huddleston, who denied the allegations in Dunkin's lawsuit.
"You can say whatever you want to say when you file a lawsuit," Huddleston said. He said his clients want to preserve the bank's consistent management and protect their investments.
"Mr. Dunkin doesn't own the bank," Huddleston said, and referred other questions to Chris Boswell, who he identified as his co-counsel.
Boswell said Wednesday that he is representing his wife's interests in the lawsuit.
Boswell said his wife and her family own 33 percent of the bank's stock, and Dunkin and his family own 29 percent.
He denied that the new stock was issued at a lower-than-market-value price, saying, "The market value is whatever a willing buyer is willing to pay a willing seller."
The new stock issue and purchase "infuses almost $2 million into the bank," which will allow the bank to continue to grow, he said.
Dunkin, Boswell said, "has dragged his feet" on efforts to expand the bank.
His wife's banking experience and that of bank president Scott have resulted in First Community Bank's growth from a $50 million bank to a $170 million bank, Boswell said.
The Feb. 14 board meeting was called in response to Dunkin's call on Feb. 9 for a special stockholders meeting scheduled for Feb. 25.
At that meeting, Dunkin would propose to remove the four board members, Boswell said.
"We're not trying to get rid of Bob Dunkin," Boswell said. "It's the other way around."
Boswell also called it "unfortunate" that this "family matter" is "being blown out of proportion" and is appearing in the newspaper at a time when it could be resolved privately.
According to the corporate resolution voted on Feb. 14, board members Anita Simmons Boswell would buy 5,000 shares, Cecil Simmons would buy 9,091 shares, Leonard Simmons would buy 12,727 shares; and bank president Scott would buy 8,182 shares.
When contacted Wednesday, Dunkin said, "I want to take the bank in another direction."
Telephone messages seeking comment from Cecil Simmons, Leonard Simmons and Michael Scott were not returned.
Gilbert Garza and George Labar could not be reached for comment.
Charlene Vandini is the city editor of the Valley Morning Star.