SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 4)
Under the Securities Exchange Act of 1934
CARVER BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
146875109
- --------------------------------------------------------------------------------
(CUSIP Number)
Robert W. Forman
Shapiro Forman & Allen LLP
380 Madison Avenue
New York, New York 10017
212-972-4900
-------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 18, 2000
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |__|.
Check the following box if a fee is being paid with the statement |__|.
Page 1 of 38 pages
<PAGE>
CUSIP No. 146875109 Page 2 of 38 Pages
Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
BBC CAPITAL MARKET, INC.
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
04-3072694
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
MASSACHUSETTS
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 170,700
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 170,700
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
-0-
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
170,700
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.38%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
CO
________________________________________________________________________________
<PAGE>
CUSIP No. 146875109 Page 3 of 38 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
THE BOSTON BANK OF COMMERCE
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
04-2764211
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
MASSACHUSETTS
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 170,700
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
-0-
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 170,700
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
-0-
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
170,700
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.38%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
BK
________________________________________________________________________________
<PAGE>
CUSIP No. 146875109 Page 4 of 38 Pages
STATEMENT FOR SCHEDULE 13D
--------------------------
This Amendment No. 4 to Schedule 13D relates to the common stock, par value
$.01 per share, of Carver Bancorp, Inc. ("Carver"). This Amendment No. 4 amends
the initial statement on Schedule 13D filed by BBC Capital Market, Inc.("BBCM")
and The Boston Bank of Commerce ("BBOC") with the Securities and Exchange
Commission on March 18, 1999 (the "Initial Statement"), as amended by Amendment
Nos. 1, 2 and 3, filed with the Securities and Exchange Commission on March 29,
1999, April 2, 1999 and November 19, 1999, respectively. Capitalized terms used
but not defined below shall have the meanings ascribed to them in the Initial
Statement. The Initial Statement, as previously amended, is further amended as
follows:
Item 4. Purpose of the Transaction.
On January 18, 2000, BBCM filed a complaint in the Court of Chancery of the
State of Delaware, New Castle County, against Carver, its directors, Morgan
Stanley & Co., Inc. and Provender Opportunities Fund, L.P., seeking to enjoin
defendants from counting the votes of Morgan Stanley and Provender with respect
to 100,000 shares of Carver's super-voting Preferred Stock issued to those
parties on January 11, 2000 in a blatant attempt to disenfranchise Carver's
public shareholders and to thwart BBCM's efforts to elect two directors to
Carver's board of directors at its Annual Meeting of Shareholders scheduled for
February 24, 2000 (the "Meeting"). A copy of the Complaint is filed herewith as
Exhibit 99.2.
The Meeting is the result of a litigation brought by BBCM to compel Carver
to hold the Meeting. In response to BBCM's complaint, Carver agreed to hold the
Meeting on February 24, 2000, to establish January 11, 2000 as the record date
for shareholders entitled to receive notice of, and to vote at, the Meeting, and
to recognize that Kevin Cohee and Teri Williams, BBCM's candidates, were
properly nominated.
BBOC and BBCM intend to solicit proxies in support of the election of Mr.
Cohee and Ms. Williams.
<PAGE>
CUSIP No. 146875109 Page 5 of 38 Pages
Item 7. Material to be Filed as Exhibits.
99.2 A copy of the complaint in the action known as BBC Capital Market, Inc.
v. Carver Bancorp, Inc. et al filed in the Court of Chancery of the State of
Delaware in and for New Castle County on January 18, 2000.
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: January 18, 2000
BBC CAPITAL MARKET, INC.
By: /s/Michael P. Burley
----------------------
Michael P. Burley,
Treasurer
THE BOSTON BANK OF COMMERCE
By: /s/Teri Williams
----------------------
Teri Williams,
Senior Vice President
CUSIP No. 146875109 Page 6 of 38 Pages
EXHIBIT 99.2
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
BBC CAPITAL MARKET, INC., )
)
Plaintiff, )
)
v. ) Civil Action No. ____________
)
CARVER BANCORP, INC., a Delaware )
corporation, DEBORAH C. WRIGHT, )
DAVID N. DINKINS, LINDA H. )
DUNHAM, ROBERT J. FRANZ, )
PAZEL G. JACKSON, JR., HERMAN )
JOHNSON, DAVID R. JONES, )
FREDERICK O. TERRELL, )
MORGAN STANLEY & CO. INC., a )
Delaware corporation, and PROVENDER )
OPPORTUNITIES FUND, L.P., a )
Delaware limited partnership, )
)
Defendants. )
VERIFIED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
--------------------------------------------------------
Plaintiff BBC Capital Market, Inc. ("BBC Capital"), by its undersigned
attorneys, upon knowledge as to itself and its own actions and otherwise upon
information and belief, alleges as follows:
Nature of the Action
--------------------
1. A most fundamental principle of Delaware law is that directors cannot
interfere with the free exercise of the corporate franchise absent a compelling
justification. When a contest for the election of directors has been announced
and is underway, the prospect that the stockholders might vote differently than
the board recommends does not constitute a legitimate threat to a corporate
interest justifying defensive action. These principles, recognized by this Court
in Blasius Industries v.
<PAGE>
CUSIP No. 146875109 Page 7 of 38 Pages
Atlas Corp. and Stahl v. Apple Bancorp, and endorsed by the Supreme Court in
Stroud v. Grace, have been transgressed here in the most crude and arrogant
fashion.
2. On the record date for its annual meeting, the directors of defendant
Carver Bancorp, Inc. ("Carver") placed blocks of super-voting preferred stock
representing 8.3% of the outstanding votes in the hands of their allies. The
next day, a representative of one of those allies, Morgan Stanley & Co
Incorporated ("Morgan Stanley"), called the President of BBC Capital and
threatened that Morgan Stanley would "crush" him if he pursued a proxy contest.
3. This is an action to prevent the board of directors of Carver from
disenfranchising Carver's public stockholders by stuffing the ballot box at its
upcoming annual meeting, in order to force the re-election of management's two
incumbent nominees, David N. Dinkins, the former mayor of New York, and David R.
Jones, Carver's non-executive Chairman.
4. BBC Capital is a wholly-owned subsidiary of The Boston Bank of Commerce
("BBOC"), an African-American-owned bank based in Boston. BBC Capital is also a
7.4% stockholder of Carver. For the past year, Kevin Cohee, the Chairman,
President and Chief Executive Officer of BBOC, has been pursuing a stock-
for-stock merger between highly profitable BBOC and financially troubled Carver,
which is the holding company for the nation's largest African-American bank, New
York-based Carver Federal Savings Bank.
5. After Cohee's efforts were publicly rebuffed by Carver in March and
April 1999, BBC Capital announced its intention to nominate two persons to
Carver's classified board of directors at its next annual meeting, which should
have occurred in August 1999.
6. When Carver's board learned that Carver's institutional investors
supported BBC Capital's nominees, Carver refused to call an annual meeting.
<PAGE>
CUSIP No. 146875109 Page 8 of 38 Pages
7. BBC Capital sued Carver in this Court in November 1999 under Section 211
of the Delaware General Corporation Law to compel an annual meeting. Carver
capitulated, settling that lawsuit by stipulating that Carver would hold an
annual meeting on February 24, 2000, with a January 11, 2000 record date, by
conceding that BBC Capital's two nominees were validly nominated and by agreeing
to provide a stock list to BBC Capital.
8. Forced to hold an annual meeting, Carver's board, led by its new Chief
Executive Officer, Deborah C. Wright, turned to two of her long-time friends and
committed allies, William Lewis, the co-head of mergers and acquisitions at
Morgan Stanley Dean Witter & Co., and Frederick O. Terrell, the managing general
partner of Provender Opportunities Fund, L.P. ("Provender").
9. On the record date, January 11, Caver's board sold Provender and Morgan
Stanley & Co., Incorporated ("Morgan Stanley") blocks of super-voting preferred
stock that they are publicly committed to voting in the incumbents' favor. These
blocks of stock were issued for the sole or primary purpose of determining the
outcome of the upcoming election. They represent 8.3% of the outstanding votes.
10. Carver admittedly had no immediate need for the $2.5 million Wright's
allies invested. The investment met no pre-existing corporate plan. No fairness
opinion was obtained. The terms of the securities presented a no-lose investment
for Morgan Stanley and Provender. They carry a liquidation preference and a
7.875% accumulating dividend and they can be converted into common stock at a
conversion ratio reflecting the market price shortly after the date of issuance.
<PAGE>
CUSIP No. 146875109 Page 9 of 38 Pages
11. There is no question that Morgan Stanley and Provender got these shares
because they are committed to supporting Wright and defeating BBC Capital's
nominees. On January 12, Lewis's subordinate, David Grain, called Cohee and said
that he was delivering a message from Lewis and from John Mack, the President
and Chief Operating Officer of Morgan Stanley Dean Witter & Co. The message was
that Cohee "had better leave Debbie [Wright] alone and not run for these board
seats." If Cohee persisted, Morgan Stanley "would use their M&A dept. and PR
firm to crush [him]." Grain warned Cohee that he had "better think about [his]
future business opportunities because there are a lot of ways they can get
[him]." Grain reported that Morgan Stanley had already talked to dissident
shareholder Don Rice and "gotten him straightened out." A copy of Cohee's
contemporaneous notes of Grain's threats are attached as Exhibit A hereto.
12. Morgan Stanley's and Wright's arrogant belief that they could
intimidate BBC Capital is reflected in the preliminary proxy statement Carver
filed on January 12, 2000. That filing makes no mention of the fact that BBC
Capital had nominated two persons to become directors of Carver, or even the
names of BBC Capital's nominees. Instead, Carver's filing misleadingly implies
that the upcoming election of directors is uncontested.
13. This Court's immediate intervention is essential to undo these crude
attempts to disenfranchise Carver's public stockholders. There are less than six
weeks until the annual meeting. Absent an order reversing these two illegal
share issuances and enjoining Wright, Morgan Stanley and their allies from
carrying out their
<PAGE>
CUSIP No. 146875109 Page 10 of 38 Pages
crude threats to crush any shareholder who dares to challenge the incumbents,
BBC Capital's efforts to compete for the two director seats will be irreparably
chilled, the shareholder franchise at Carver will be destroyed and fundamental
principles of Delaware corporation law will be trampled.
The Parties
-----------
14. Plaintiff BBC Capital, a Massachusetts corporation, is a wholly- owned
subsidiary of BBOC, a Massachusetts trust company. Kevin Cohee, the Chairman,
President and Chief Executive Officer of BBOC, and his wife, Teri Williams, the
Senior Vice-President-Marketing/Human Resources of BBOC, own as joint tenants
66.6% of the outstanding common stock of BBOC. BBOC underwent a dramatic
turnaround after Cohee and Williams took control of the bank in 1995. BBC
Capital is operated solely for the purpose of holding securities on behalf of
BBOC. BBC Capital owns 170,700 shares of Carver common stock, which represents
about 7.4% of the common shares outstanding.
15. Defendant Carver is the holding company for Carver Federal Savings
Bank. As of September 30, 1999, Carver reported having total assets of
$413,231,895. Carver's dismal financial results and poor operations have been
widely reported in the press.
16. Defendant Debra C. White was appointed President, Chief Executive
Officer and a director of Carver on June 1, 1999. She had no prior experience in
commercial banking.
<PAGE>
CUSIP No. 146875109 Page 11 of 38 Pages
17. Defendant David N. Dinkins is a director of Carver and the former mayor
of New York City. He has no experience in commercial banking other than his
service as a director of Carver. His seat on the board of directors is up for
election at the upcoming annual meeting.
18. Defendant David R. Jones is a director of Carver and the President of
the Community Service Society of New York, a nonprofit social welfare
organization. His seat on the board of directors is up for election at the
upcoming annual meeting.
19. Defendant Linda H. Dunham is a director of Carver and the
owner/operator of six McDonald's restaurants in New York and New Jersey.
20. Defendant Robert J. Franz is a director of Carver and a retired Senior
Vice President of Booz-Allen & Hamilton, Inc.
21. Defendant Pazel G. Jackson, Jr. is a director of Carver and a Senior
Vice President in the Community Development Group of Chase Manhattan Bank.
22. Defendant Herman Johnson is a self-employed certified public
accountant. He has been a director of Carver since 1981.
23. Defendant Frederick O. Terrell became a director of Carver as of
January 11, 2000. His appointment is subject to the approval of the Office of
Thrift Supervision. Terrell is Managing General Partner of Provender.
24. Defendant Morgan Stanley is a Delaware corporation. Morgan Stanley was
issued 40,000 shares of Carver's Series A Preferred Stock on January 11,
<PAGE>
CUSIP No. 146875109 Page 12 of 38 Pages
2000. William Lewis of Morgan Stanley has been advising Wright since her
appointment as Chief Executive Officer in June 1999.
25. Defendant Provender is a Delaware limited partnership. Provender was
issued 60,000 shares of Carver's Series B Preferred Stock on January 11, 2000.
Cohee Proposes a Merger of BBOC and Carver
------------------------------------------
26. In early 1999, Carver fired its Chief Executive Officer after having
reported a quarterly loss of $5.7 million, a write-off of $2.5 million in
consumer loans, the shut-down of its consumer-lending subsidiary, $10 million of
non-performing loans and a $500,000 increase in deposit insurance premiums.
27. On February 19, 1999, Cohee, Williams and BBOC's counsel met with
Carver's Chairman, David Jones, and Carver's acting chief executive, Pazel
Jackson, to discuss a possible business combination of Carver and BBOC.
28. On March 1, 1999, Cohee sent a letter to Jackson outlining a proposed
merger whereby BBOC would acquire Carver in a stock-for-stock transaction. A
combination of Carver and BBOC would have created the nation's only interstate
African-American financial institution.
29. On March 9, 1999, Carver responded that its board of directors had
rejected the proposed transaction and would instead focus on hiring a new Chief
Executive Officer.
30. On March 18, 1999, BBC Capital and BBOC filed a Schedule 13D reporting
that BBC Capital had acquired 161,300 shares of Carver common stock,
<PAGE>
CUSIP No. 146875109 Page 13 of 38 Pages
representing 6.97% of the common stock outstanding. BBC Capital soon increased
its stake in Carver to 7.38%.
31. On March 22 1999, Cohee sent a letter to Carver stating that BBOC was
nominating himself and Teri Williams for election to the board of directors of
Carver at its next annual meeting of stockholders.
32. By a separate letter dated March 31, 1999, Cohee made a revised merger
proposal whereby Carver shares would be exchanged for all of the outstanding
shares of BBOC based on their respective tangible book values at the time of
closing, which had represented a 26% premium over Carver's market
capitalization. Cohee sought to meet with Carver.
33. Instead of negotiating with BBOC, Carver rejected BBOC's revised merger
proposal. In April 1999, Carver announced that it would be hiring Wright, the
President of the federally funded, non-profit Upper Manhattan Empowerment Zone,
to take over as CEO of Carver on June 1, 1999.
Cohee Prepares for an Annual Meeting
------------------------------------
34. After BBOC's revised merger proposal was rejected, Cohee announced that
BBOC would continue to push for a merger with Carver.
35. In correspondence with Carver in May and June, 1999, BBC Capital
formally nominated Kevin Cohee and Teri Williams as candidates for election to
the two spots on Carver's seven-member, classified board of directors which were
to become open at the 1999 annual meeting. Carver's advance notice bylaw
required that BBC Capital provide Carver with the same background information
about Cohee and
<PAGE>
CUSIP No. 146875109 Page 14 of 38 Pages
Williams that the Securities and Exchange Commission mandates disclosure of in a
proxy statement. BBC Capital also made a demand for a stockholder list and
related materials pursuant to Section 220 of the Delaware General Corporation
Law.
36. By letters dated June 30, 1999 and July 22, 1999, counsel for Carver
agreed to provide BBC Capital with a stock list, any available breakdown of the
beneficial holders, and daily transfer sheets from the date of the stock list
until the date of the 1999 annual meeting of the Company's stockholders.
37. The fight for control received significant media attention. In its May
24, 1999 issue, Fortune published an article (attached hereto as Exhibit B)
saying that Cohee "vows to take his idea to shareholders at their August
meeting." That same article reported that Wright "can count on the support of an
influential network that includes . . . William Lewis, co-head of Morgan
Stanley's worldwide M&A department . . . ."
38. In a July 11, 1999 article entitled "A Shaky Pillar in Harlem"
(attached hereto as Exhibit C), The New York Times reported on Carver's history
of financial and operational troubles, Carver's restless shareholders, BBOC's
merger proposal, and Cohee's plan to run for a seat on Carver's board.
39. The New York Times article noted that shareholder Joseph Sonnenberg
would again propose a resolution that Carver be sold, which resolution had been
favored by more than a quarter of those who voted in 1998. Sonnenberg was quoted
as saying that Carver "has a lot to prove and I don't want to wait around that
long." The same article also quoted legendary investor Martin Whitman, whose
fund
<PAGE>
CUSIP No. 146875109 Page 15 of 38 Pages
owns almost 10 percent of Carver's shares, as saying: "Obviously I have no
reason to be terribly supportive of the old board or the new C.E.O."
40. Based on the dissatisfaction expressed by several significant
stockholders, Cohee was confident that he and Teri Williams would succeed in
gaining election to the Carver board of directors and that they could do so
without undertaking a formal proxy solicitation.
41. Carver undertook its own poll of large stockholders and learned that
they overwhelmingly favored the election of Cohee and Williams to the board.
Acting on the advice of Morgan Stanley, Carver's board did not call an annual
meeting of stockholders.
BBC Capital Files Suit to Force an Annual Meeting
-------------------------------------------------
42. Carver's previous annual meeting was held on August 14, 1998. Through
October 1999, no annual meeting had yet been called by Carver.
43. On November 9, 1999, BBC Capital filed suit in the Delaware Court of
Chancery (C.A. No. 17564) seeking a summary order pursuant to Section 211
compelling Carver to convene an annual meeting. Given that over thirteen months
had elapsed since the prior annual meeting, success in the lawsuit was a
certainty.
44. Carver immediately capitulated, announcing that it would hold an annual
meeting of stockholders on February 24, 2000. In a filing with the Securities
and Exchange Commission on November 16, 1999, Carver falsely described BBC
Capital's lawsuit as being "without merit."
<PAGE>
CUSIP No. 146875109 Page 16 of 38 Pages
45. On December 7, 1999, BBC Capital and Carver entered into a Stipulation
and Order of Dismissal providing that (i) Carver would hold its annual meeting
on February 24, 2000; (ii) the record date for the annual meeting would be
January 11, 2000; (iii) Kevin Cohee and Teri Williams were validly nominated in
compliance with Carver's bylaws; and (iv) Carver would provide BBC Capital with
a list of its stockholders of record as of January 11, 2000 within five business
days thereafter.
46. The provisions of the Stipulation and Order of Dismissal were designed
to ensure that Carver's stockholders would soon have the opportunity to vote for
Cohee and Williams and thereby express their support for a change of direction
at Carver.
Wright, Morgan Stanley and Provender Conspire to Steal the Election,
Intimidate Challengers and Mislead Carver's Stockholders
--------------------------------------------------------
47. In the month leading up to the record date, Carver disclosed nothing to
suggest that it would impede a full and fair vote on the merits of BBC Capital's
nominees. As it turns out, Carver's board, led by Wright, and their co-
conspirators at Morgan Stanley and Provender, were only attempting to lull Cohee
into inaction before launching a coordinated blitzkrieg to steal the election
and intimidate Cohee into submission.
48. On January 12, 2000, the defendants' secret entrenchment plan was
unveiled. On that day, (i) Carver announced that it had placed two blocks of
super-voting preferred stock with Wright's allies at Morgan Stanley and
Provender, (ii)
<PAGE>
CUSIP No. 146875109 Page 17 of 38 Pages
Morgan Stanley called Cohee and threatened to "crush" him and his businesses if
he dared contest the election of directors at Carver; and (iii) Carver filed a
false and misleading preliminary proxy statement.
Carver Places Super-Voting Preferred Stock With Committed Allies
----------------------------------------------------------------
49. On January 12, 2000, Carver issued a press release announcing that it
had entered into "strategic alliances" with Morgan Stanley Dean Witter & Co.
(the parent of Morgan Stanley) and Provender Capital Group, L.L.C. (an affiliate
of Provender) whereby Morgan Stanley had invested $1 million in the form of a
convertible preferred security representing a 3.3% equity stake in Carver and
Provender had invested $1.5 million in the form of a convertible preferred
security representing a 4.95% equity stake in Carver.
50. The press release made no pretense that Carver had any immediate need
to raise funds or that the financing was the outgrowth of any long-term plan.
Instead, the press release said that the funds would be used by Carver "to
pursue its new growth strategy." The press release also noted that Carver had
just "restructured [its] management team."
51. The press release did not indicate what the supposed "strategic
alliances" entailed other than that Morgan Stanley Dean Witter & Co. and
Provender Capital Group, L.L.C. could provide "strategic advice."
52. In reality, the "strategic alliances" were a means to funnel votes into
the hands of committed allies on the eve of the annual meeting. Although nowhere
mentioned in the press release, the financings had been consummated the previous
day,
<PAGE>
CUSIP No. 146875109 Page 18 of 38 Pages
January 11, 2000, which was the record date for the annual meeting, and the
preferred stock issued to Morgan Stanley and Provender carries a super-voting
feature of 2.083 votes per share.
53. There is no doubt that Morgan Stanley and Provender will support Wright
and the incumbents in any proxy contest. Morgan Stanley's Lewis and Provender's
Terrell have each been advising Wright ever since she was appointed Chief
Executive Officer of Carver. They have publicly stated their support for her.
The three are long-standing personal friends.
54. The financial terms of the preferred stock reveal that they were not
motivated by legitimate business objectives. From the perspective of Morgan
Stanley and Provender, the financings are a no-lose investment. Both classes of
preferred stock carry a liquidation preference of $25.00 per share (the amount
paid) plus an annual accumulating dividend of 7.875%. The shares are redeemable
by the holders after four years at the liquidation preference plus the amount of
any unpaid dividends, and they are convertible at any time into 2.083333 shares
of common stock, which is equivalent to the $12 market price of the thinly
traded common stock shortly after the date of issuance. Provender's managing
general partner gets an immediate seat on Carver's board of directors, and if
Carver fails to make three dividend payments and its capital is depleted below a
certain threshold, Provender and/or Morgan Stanley get an additional three seats
on the board. From the perspective of Carver, the preferred stock is expensive
voting debt. Carver's filings do not indicate
<PAGE>
CUSIP No. 146875109 Page 19 of 38 Pages
that alternative forms of investment were considered by Carver or that a
fairness opinion was obtained.
Morgan Stanley's Threats
------------------------
55. The actions of Morgan Stanley are powerful evidence of the true
motivations for issuing the super-voting blocks of stock. On January 12, 2000,
Cohee received a telephone call from David Grain, an acquaintance of his who
works at Morgan Stanley. Grain informed Cohee that he had been asked to deliver
a message from John Mack, the President of Morgan Stanley's parent, and from
William Lewis.
56. The message was blunt. As recorded in Cohee's contemporaneous
hand-written notes, Grain told Cohee that he "had better leave Debbie [Wright]
alone and not run for these board seats." Grain warned Cohee that if he "did not
move on they were going to have to take the gloves off and that the full weight
of Morgan Stanley would be used against [Cohee]."
57. Grain threatened that Morgan Stanley "would use their M&A dept. and PR
firm to crush [Cohee]." This was no colorful language to describe the ordinary
give and take of a proxy campaign. Grain warned Cohee that he "better think
about [his] future business opportunities because there are a lot of ways they
can get [him]." Grain said that Cohee should have listened when they told him to
sell his shares three months earlier and that Cohee "should realize by now that
they are going to do what they want to do" regardless of how many shares BBC
Capital owns.
<PAGE>
CUSIP No. 146875109 Page 20 of 38 Pages
58. Grain added that Morgan Stanley had already "straightened out" another
dissident stockholder, Don Rice, who had contemplated running for a board seat.
59. Apparently, Morgan Stanley's effort to intimidate Cohee and Rice from
challenging Wright's control reflected the first installment of the "invaluable
strategic advice" that Morgan Stanley was providing to Wright and Carver as part
of the "strategic alliance" that Carver was simultaneously touting in its press
release.
Carver's False and Misleading Preliminary Proxy Statement
---------------------------------------------------------
60. Carver's preliminary proxy statement reflects the efforts by Wright and
Morgan Stanley to snuff out potential challenges to her control. The preliminary
proxy statement makes no mention of the fact that BBC Capital had nominated
Cohee and Williams to run against incumbents Jones and Dinkins or that BBC
Capital had gone to Court to secure the holding of the annual meeting. Instead,
Carver misleadingly implies that the two seats are not being contested.
61. Cohee and Williams are not even listed as nominees for the two seats
whose terms are expiring. Under the heading "Information with Respect to
Nominees and Continuing Directors" Carver writes: "The following table sets
forth certain information with respect to each of Carver's nominees . . ."
(Emphasis Added)
62. Carver and its directors have no excuse for not listing Cohee and
Williams as nominees. Acting pursuant to Carver's advance notice bylaw, BBC
Capital had previously supplied Carver with all the information necessary to
make full disclosure.
<PAGE>
CUSIP No. 146875109 Page 21 of 38 Pages
63. The only glancing reference to any opposition to the board nominees is
the following cryptic sentence: "As of the date of this proxy statement, Carver
had received three nominations for election as directors from two stockholders
in connection with the Annual Meeting." Those two stockholders were Rice and BBC
Capital, both of whom had been threatened by Morgan Stanley.
64. If Carver had disclosed basic information about BBC Capital's
nominations, or even the fact that BBC Capital had nominated candidates,
Carver's stockholders would know that they had the opportunity to elect
directors who were also significant stockholders and thus had a direct incentive
to enhance stockholder value. The only mention of Cohee and Williams in the
preliminary proxy statement is in the paragraph describing the background of BBC
Capital, a 7.38% holder of Carver common stock.
65. The preliminary proxy compounds that omission by misleadingly
suggesting that BBC Capital is not contesting the two seats. In two paragraphs
devoted to the expenses incurred by the Company for proxy solicitation, it is
disclosed that "in the event of an election contest," the anticipated cost would
increase. Carver well knew that BBC Capital had gone to Court to secure the
right to contest this very election, but that fact was not disclosed either.
16
<PAGE>
CUSIP No. 146875109 Page 22 of 38 Pages
Irreparable Injury
------------------
66. The intended effect of Carver's, Wright's, Morgan Stanley's and
Provender's actions is to disenfranchise Carver's public stockholders by
stuffing the ballot box at its upcoming annual meeting, intimidate challengers
from contesting the board seats, and thereby force the re-election of
management's two incumbent nominees. Absent an injunction, BBC Capital's efforts
to compete for the two director seats will be irreparably chilled and the
shareholder franchise at Carver will be destroyed. The resulting injury to BBC
Capital and the public stockholders of Carver is impossible to quantify.
COUNT I
(Breach of Fiduciary Duty of Loyalty Against the Director Defendants)
---------------------------------------------------------------------
67. Plaintiff repeats and realleges the preceding paragraphs as if fully
set forth herein.
68. At all relevant times, the director defendants were fiduciaries owing a
fiduciary duty of loyalty to Carver and all of its stockholders. This duty
includes but is not limited to the obligation to refrain from taking any action
for the sole or primary purpose of impeding the effectiveness of shareholder
action absent compelling justification. This duty also includes the obligation
to refrain from acting for the sole or primary purpose of entrenchment and to
refrain from taking any defensive action that is not reasonable or proportionate
to a cognizable threat to a legitimate corporate interest.
<PAGE>
CUSIP No. 146875109 Page 23 of 38 Pages
69. By placing supervoting stock in the hands of committed allies on the
eve of a contested election, by failing to disclose to stockholders the basic,
known facts of the choice before them, and by conspiring with Morgan Stanley to
intimidate Cohee and others into dropping any challenge to the election of
directors at Carver, the director defendants have breached their duty of
loyalty.
70. BBC Capital has no adequate remedy at law.
COUNT II
(Breach of Fiduciary Duty of Disclosure Against the Director Defendants)
------------------------------------------------------------------------
71. Plaintiff repeats and realleges the preceding paragraphs as if fully
set forth herein.
72. At all relevant times, the director defendants were fiduciaries owing a
fiduciary duty of disclosure to all of the stockholders of Carver. This
fiduciary duty of disclosure obligates directors to disclose fully and fairly to
stockholders all material information reasonably available when seeking
stockholder action. An omitted fact is material if there is a substantial
likelihood that a reasonable stockholder would consider it important in deciding
how to vote.
73. By not disclosing basic known facts about the nominations put forward
by BBC Capital, or the circumstances surrounding the calling of the annual
meeting, while suggesting that the election of directors would be unopposed, the
director defendants have breached their duty of loyalty.
74. BBC Capital has no adequate remedy at law.
<PAGE>
CUSIP No. 146875109 Page 24 of 38 Pages
COUNT III
(Aiding and Abetting Breaches of Fiduciary Duty)
------------------------------------------------
74. Plaintiff repeats and realleges the preceding paragraphs as if fully
set forth herein.
75. The director defendants have breached their fiduciary duties to Carver
and its stockholders.
76. Morgan Stanley and Provender have aided and abetted the director
defendants in their breach of fiduciary duties. As direct participants in the
eleventh-hour issuances of super-voting preferred stock, and in Morgan Stanley's
case, as the bearer of threats that Cohee and Rice not seek to unseat two of
Carver's incumbent directors, Morgan Stanley and Provender knew of and actively
encouraged and participated in the breach of fiduciary duties set forth herein.
77. BBC Capital has no adequate remedy at law.
COUNT IV
(Pursuant to 10 Del. C.ss.6501)
-------------------------------
78. Plaintiff repeats and realleges each of the preceding paragraphs as if
fully set forth herein.
79. Article V Section 2 of the Certificate of Incorporation of Carver
provides that no person shall "directly or indirectly acquire or hold the
beneficial ownership of more than ten percent (10%) of the issued and
outstanding Voting Stock of the Corporation." Article V Section 3 of the
Certificate of Incorporation requires the sterilization of any shares in excess
of 10% beneficially owned by any person.
<PAGE>
CUSIP No. 146875109 Page 25 of 38 Pages
80. The incumbent directors, certain former officers and directors and
their co-conspirators at Morgan Stanley and Provender have been acting as a
group and collectively own more than 10% the voting stock of the Company.
81. There exists an immediate need for a determination that the incumbent
directors and their co-conspirators at Morgan Stanley and Provender cannot cast
in excess of 10% of the votes at the upcoming annual meeting.
WHEREFORE, BBC Capital demands judgment and preliminary and permanent
injunctive relief and declarative relief as follows:
(A) An order preliminarily and permanently enjoining Carver, its officers,
directors, agents, servants, employees and those acting in concert or
participation with them who receive actual notice thereof, from (i) treating any
stock issued to Morgan Stanley as validly issued stock for purposes of voting;
(ii) treating any stock issued to Provender as validly issued stock for purposes
of voting; (iii) taking any steps to solicit proxies in favor of Carver's
nominees until such time as all disclosure violations are cured; and (iv) taking
any action to eliminate, impede or obstruct a proxy solicitation by BBC Capital.
(B) An order preliminarily and permanently enjoining Morgan Stanley, its
officers, directors, agents, servants, employees and those acting in concert or
participation with them who receive actual notice thereof, from (i) aiding and
abetting the director defendants' breach of fiduciary duties to Carver's
stockholders; and (ii) taking any action to eliminate, impede or obstruct a
proxy solicitation by BBC Capital.
<PAGE>
CUSIP No. 146875109 Page 26 of 38 Pages
(C) An order preliminarily and permanently enjoining Provender, its
officers, directors, agents, servants, employees and those acting in concert or
participation with them who receive actual notice thereof, from (i) aiding and
abetting the director defendants' breach of fiduciary duties to Carver's
stockholders; and (ii) taking any action to eliminate, impede or obstruct a
proxy solicitation by BBC Capital.
(D) An order (i) rescinding the transaction by which Morgan Stanley was
issued 40,000 shares of Carver Series A Preferred Stock, and (ii) rescinding the
transaction by which Provender was issued 60,000 shares of Carver Series B
Preferred Stock;
(E) A declaration that Carver's incumbent directors, certain former
officers and directors and their co-conspirators at Morgan Stanley and Provender
cannot cast in excess of 10% of the votes at the upcoming annual meeting;
(F) An award to BBC Capital of the costs and disbursements of this action,
including reasonable attorneys' fees and experts' fees; and
(G) Such other and further relief as the Court may deem just and proper.
/s/Andre G. Bouchard
------------------------------------
Andre G. Bouchard
Joel Friedlander
BOUCHARD MARGULES FRIEDLANDER
& MALONEYHUSS
222 Delaware Avenue, Suite 1102
Wilmington, DE 19801
(302) 573-3500
Attorneys for Plaintiff
<PAGE>
CUSIP No. 146875109 Page 27 of 38 Pages
OF COUNSEL:
Stuart L. Shapiro
SHAPIRO FORMAN & ALLEN LLP
380 Madison Avenue
New York, NY 10017
(212) 972-4900
DATED: January 18, 2000
<PAGE>
CUSIP No. 146875109 Page 28 of 38 Pages
STATE OF FLORIDA )
) ss.
COUNTY OF DADE )
I, Kevin Cohee, being duly sworn, depose and say:
I am the President of BBC Capital Market, Inc. I have read the Verified
Complaint. The allegations in the Verified Complaint regarding myself, BBC
Capital Market, Inc. and The Boston Bank of Commerce are true to the best of my
knowledge and belief.
/s/Kevin Cohee
--------------------------------
Kevin Cohee
SWORN TO AND SUBSCRIBED before
me this 18th day of January, 2000.
/s/
- ----------------------------------
Notary Public
<PAGE>
CUSIP No. 146875109 Page 29 of 38 Pages
EXHIBIT A TO COMPLAINT
1/12
David Grain
o Morgan Stanley has invested in Carver through merchant banking fund.
o John Mac and Bill Lewis told him to call to tell me that I had better not
let my balls get in the way of my brain.
o That I had better leave Debbie alone and not run for these board seats.
o That if I did not move on they were going to have to take the gloves off
and that the full weight of Morgan Stanley would be used against me.
o That I had better take credit for this investment and move on because they
would use their M&A department and PR firm to crush me.
o They told me to step off three months ago and I should have listened.
o That I should realize by now that they are going to do what they want to do
and they do not give a shit how many shares I own.
o That they had called Don Rice and gotten him straightened out.
o That I better think about my future business opportunities because there
are a lot of ways they can get me.
<PAGE>
CUSIP No. 146875109 Page 30 of 38 Pages
EXHIBIT B TO COMPLAINT
Copyright 1999 Time Inc.
Fortune
May 24, 1999
SECTION: FIRST:; Pg. 46
LENGTH: 627 words
HEADLINE: Fighting to Rebuild a Harlem Institution;
WILL CARVER SAVINGS SNATCH DEFEAT FROM THE JAWS OF VICTORY?
BYLINE: Edward Robinson
BODY:
As the daughter of a Baptist minister, Deborah Wright knows something
about salvation. And that's a good thing, because she'll be needing that
training in her latest task: saving Carver Federal Savings, the nation's largest
black-owned bank. On June 1, when the 41-year-old Wright becomes Carver's CEO,
she'll be taking control of a thrift with $ 420 million in assets and some very
serious trouble. Even as Harlem, where Carver is headquartered, is enjoying
something of an economic revival, Carver's stock is down 40% from its 52-week
high. In its fiscal quarter that ended Dec. 31, it reported a $ 5.7 million
loss, forcing it to shut down its consumer-lending subsidiary. In January the
board fired CEO Tom Clark. Federal regulators are watching.
"This is prime time for redevelopment in Harlem right now," says Wright
as she looks out her office window at a Starbucks going up at Lenox Avenue and
125th Street, "and Carver should be hitting on all cylinders." Obviously it
isn't, and the reason is that its underwriting department made too many
unsecured loans. Carver has more than $ 10 million in nonperforming loans but
only $ 6 million set aside in reserves; best banking practices dictate a minimum
loss-reserve level of around 160%. And as if all this weren't enough for a new
CEO to sort through, one of Wright's classmates at Harvard Law--and a friend, to
boot--is mounting an unwelcome challenge to take control.
Kevin Cohee, 41, has been the CEO of black-owned Boston Bank of
Commerce since 1996 and has turned around that once-failing bank. BBOC,
privately held and with $ 104 million in assets, already has a 7% stake in
Carver. Cohee's pitch is that Wright does not have his commercial-banking
experience; he wants Carver to acquire BBOC and then install him as CEO of the
merged company. But
<PAGE>
CUSIP No. 146875109 Page 31 of 38 Pages
Carver's board wants the thrift to remain independent, and in April it turned
him down. Undaunted, Cohee vows to take his idea to shareholders at their August
meeting. "Look, this isn't about me vs. Debbie," he says. "This is about saving
this bank from Freedom National's fate," a reference to the black-owned Harlem
bank that failed in 1990.
The fact that Carver's financial woes are coming just when Harlem's
fortunes are rising isn't the only irony here; thrifts nationwide are booming.
At banks with less than $ 1 billion in assets, earnings have risen 60% during
the past five years. Many black-owned banks have shared in the wealth by
creating innovative lending practices and hedging risk through partnerships with
government-backed empowerment zones.
The latter strategy seems made to order for Wright. Since 1996 she has
led the Upper Manhattan Empowerment Zone, which has $ 250 million in
government-provided capital to promote economic development in and around
Harlem; before that she was director of the city housing agency and an
investment banker. She can count on the support of an influential network that
includes Henry Kravis; William Lewis, co-head of Morgan Stanley Dean Witter's
worldwide M&A department; and Richard Parsons, Wright's mentor and the president
of Time Warner (the owner of FORTUNE's parent).
Wright can also tap her deep roots in New York City's African-American
church community. Several parishioners approached her after a recent service at
her father's church and pledged to deposit money in Carver. "Just say when," she
says they told her. Cohee cannot match that kind of personal touch--but don't
expect the brash banker from Boston to give up without a battle.
Regardless of who wins, the challenge is clear: to make Carver an
economic force in the community again. Because given Harlem's current
renaissance, if Carver doesn't do that job, other banks will be happy to.
--Edward Robinson
GRAPHIC: TWO COLOR PHOTOS: KEN SCHLES (2), Deborah Wright and Kevin Cohee both
want to turn around a venerable savings bank. One of them will get the chance.
LANGUAGE: ENGLISH
LOAD-DATE: May 5, 1999
CLIENT: 270
LIBRARY: NEWS
FILE: CURNWS
<PAGE>
CUSIP No. 146875109 Page 32 of 38 Pages
EXHIBIT C TO COMPLAINT
Copyright 1999 The New York Times Company
The New York Times
July 11, 1999, Sunday, Late Edition - Final
SECTION: Section 1; Page 21; Column 2; Metropolitan Desk; Second Front
LENGTH: 2303 words
HEADLINE: A Shaky Pillar in Harlem;
Black-Owned Carver Bank Seeks Solid Financial Base
BYLINE: By LESLIE EATON
BODY:
As a symbol of Harlem's economic revival, almost nothing would seem to
beat the Carver Federal Savings Bank building on 125th Street. Four shiny
stories of stone and brass and skylights, it is a monument to the bank's
five-decade transformation from a struggling storefront into a pillar of its
flourishing community -- and the largest African-American financial institution
in the country.
But the bright facade is deceiving. In the last few years, Carver has
been beset by almost every problem a bank can face, including fire, fraud and
deadbeat borrowers. It has annoyed customers, infuriated shareholders and
angered some community leaders. And it has lost a lot of money -- $4.5 million
in the last fiscal year alone.
Now a new president, Deborah C. Wright, 41, must try to bring into the
21st century an institution that she concedes is about 15 years behind the times
- -- and whose last effort to modernize ended in financial disaster.
And she may not have much time. Kevin Cohee, a rival banker from Boston
who has proposed merging his black-owned bank with Carver, plans to run for a
seat on the Carver board at the annual meeting later this year.
"There are a lot of folks with very different visions of what this bank
should be," Ms. Wright said recently. But, she added, "they are really all
pressuring us to the same place" -- profitability.
To many people in Harlem and the other neighborhoods the bank serves,
Carver's history -- and its survival as an independent, black-run bank -- mean a
<PAGE>
CUSIP No. 146875109 Page 33 of 38 Pages
lot. "It is a very important institution both in terms of practicality and in
terms of its symbolism," said the Rev. Calvin O. Butts 3d, pastor of the
Abyssinian Baptist Church in Harlem, who got his home mortgage from Carver.
Whether Carver can recover will have implications far beyond New York.
While they are writ large at Carver, the bank's problems are shared by many
other minority-owned financial institutions, which tend to be small,
conservative operations serving rural or inner-city neighborhoods.
The reluctance of these banks to take risks -- a trait that served them
so well during tough times, including the savings and loan crisis of the early
1980's -- has become a handicap in the rapidly changing world of banking. Merely
providing a place for people to park their money is no longer enough.
In the 1990's, bank customers expect instant access to their money,
which requires expensive investments in technology. Big banks, forced by Federal
law to lend money in inner cities, have discovered that they can make money
there, and loom as formidable competitors to Carver on its own turf.
The competition is only getting tougher as banks merge or team up with
brokerage and insurance concerns. Indeed, Congress has passed legislation meant
to remove many of the regulations that have governed banking since the Great
Depression, further blurring the line between savings banks like Carver and
other financial institutions, like commercial banks and brokerage firms.
This brave new world has been hard for many banks, but minority-owned
institutions have particular problems, said William M. Cunningham, president of
Creative Investment Research in Washington, a company that monitors
minority-owned financial institutions. "They're too small, their costs are too
high, and there's not a lot of innovation or vision about using the resources
they have."
Survival, Not Growth, Has Been the Challenge
That caution can be explained by their history. Born in the days of Jim
Crow or in the early years of the civil rights movement, black-owned banks and
savings and loans were for decades the only financial institutions serving their
communities. They may not have had much competition, but neither did they have
many financial resources.
"Growth hasn't always been the issue -- survival has," said Dina
Nichelson, president of the American League of Financial Institutions in
Washington, a trade association for minority-owned savings and loans. The number
of savings
<PAGE>
CUSIP No. 146875109 Page 34 of 38 Pages
institutions run by black, Hispanic or female managers has dwindled, she said,
from more than 100 two decades ago to no more than 40 today.
Like many of these banks, Carver has been a prisoner of its past. It
opened on 125th Street in 1949 with the backing of the cream of Harlem's black
businessmen, as well as clergymen like the Rev. M. Moran Weston of St. Philip's
Episcopal Church on 134th Street.
The founders stuck around for decades. Father Weston and Richard T.
Greene, the longtime bank president, did not retire from the board until 1997,
when both were well into their 80's. When it came time to pick new board
members, they favored civic leaders like David N. Dinkins, the former Mayor,
over businesspeople or bankers.
Innovators they were not. Carver did not get its first automated teller
machine until 1989 -- long after they had become commonplace at other banks --
and its idea of advertising was mailing out a calendar.
Even worse than change, in board members' minds, was risk. Banks make
most of their money -- and take most of their risk -- making loans. Carver made
almost no loans, except to churches. Instead, like many other minority-owned
banks, it simply accepted deposits and invested them in money market funds and
mortgage securities, generating consistent but small profits.
The bank's caution only intensified in late 1990, when neighboring
Freedom National Bank, then one of the largest black-owned banks in the nation,
failed after having expanded too aggressively.
The memory of depositors lined up on 125th Street to try to get their
money out of Freedom haunted Carver's board members, said David R. Jones, who
joined the board in 1989 and is now its chairman. Mr. Jones, a former city
official who is president of New York's oldest family welfare organization, the
Community Service Society of New York, has had an account at Carver since he was
a child.
In 1992, Carver started having serious problems of its own. A fire
destroyed the bank's headquarters, forcing customers to take shuttle buses from
Harlem to an office far downtown, in Chelsea, or to use branches as far away as
Bedford-Stuyvesant in Brooklyn or St. Albans in Queens.
Meanwhile, Mr. Jones said, regulators began to complain that Carver had
too little capital. The bank's board for once decided to do the financially
fashionable thing -- sell shares in the bank, which had been owned by its
depositors, to the public.
<PAGE>
CUSIP No. 146875109 Page 35 of 38 Pages
Ms. Wright, now the bank president, recalled being appalled by the
news. She worked on Wall Street for three years in the 1980's. "I didn't think
they had any idea of the vast difference in what would be expected in terms of
reporting, or of the rigor of focus on performance," she said, adding that she
visited Father Weston, the bank's chairman, to beg him not to take it public.
Plunging Shares And Serious Missteps
But the deal went forward anyway. In 1994, the year Carver went public,
it made headlines when its shares plunged instead of soaring like those of most
newly public savings and loans, as investors looked askance at its poor
profitability and low levels of lending. The bank took a $250,000 charge in
November to settle a class-action lawsuit brought by investors who claimed that
they had been misled when the bank went public.
Even after raising more than $20 million through the stock sale, the
bank was still making very few loans. To this day, Federal regulators rate
Carver's community reinvestment activity as only satisfactory, rather than the
"outstanding" rating that they give big mainstream banks like Chase, which has
three branches on 125th Street.
Some Harlem leaders contend that Carver has not kept up with the
changes in the communities it serves, as the middle-class families with
Caribbean backgrounds -- like those who founded the bank -- were displaced by
immigrants from Africa, the Dominican Republic, Mexico and the West Indies.
Carver "did not keep up with changing times, did not go where the people were,"
said Lloyd A. Williams, president of the Greater Harlem Chamber of Commerce,
whose grandparents were charter depositors at the bank.
The bank did start to change under Thomas L. Clark Jr., a former state
banking regulator who became president of Carver in 1995. It began to make
mortgage loans, and it bought loans originated by other banks. These moves were
expensive, but they increased earnings over time.
But there were serious missteps. A new finance official was arrested on
Federal charges of defrauding the bank; a resolution of the case is pending. A
new computer system faltered and cost millions of dollars to fix. Grand plans to
expand in Westchester County never came to fruition.
The worst mistake was a disastrous foray into credit cards, auto loans
and other consumer lending. These areas are not intrinsically unprofitable; some
banks make big money in them. But Carver lacked the staff, savvy and resources
to do so, and an unusually high percentage of its borrowers defaulted on their
<PAGE>
CUSIP No. 146875109 Page 36 of 38 Pages
loans.
The board fired Mr. Clark in January; he is now a senior executive at
E. G. Bowman, a black-owned insurance brokerage in Manhattan. Mr. Jones said the
board had agreed with Mr. Clark's strategy but not with the way he had carried
it out.
Loan losses and computer costs forced Carver to take a $7.8 million
charge in the previous fiscal year, which more than wiped out its earnings. It
ended its fiscal year on March 31 with a loss of $4.5 million. Shortly
thereafter, regulators sharply downgraded the bank's safety and soundness
rating, and restricted its ability to make loans.
"This is like a soap opera that compressed everything that would happen
to a bank into three or four years," said Mr. Jones, the board chairman.
A Leap of Faith, And Dreams of Success
After an extensive search by a recruiting firm, Carver's board decided
to hire Ms. Wright as the new president; she took over on June 1. One of her
chief assets, Mr. Jones said, was her ability to put together strong teams of
people without offering top salaries. She served as the city's Housing
Preservation and Development Commissioner before becoming president of the Upper
Manhattan Empowerment Zone in 1996, and she had a good reputation in Harlem and
among nonprofit groups.
What she lacks is experience in commercial banking; indeed, she lacks
commercial experience of any kind, as Mr. Cohee -- the Boston banker who was
once her classmate at Harvard -- likes to point out.
The board "took a leap of faith on me," Ms. Wright said candidly.
She said she hoped to make the bank better at serving people like her,
who would like to have accounts there if the services were as good as those at
other banks. She would like the bank to advise local businessmen and women, not
just on raising money, but on finding successors to run their companies. And she
dreams of serving customers who are uneasy about banks but who must increasingly
deal with electronic paychecks and benefits and tax refunds.
But she sounds pragmatic: "We can't serve those people if we don't have
our act together."
The shareholders, however, may not be willing to wait. The bank's
historically poor financial performance has meant that, during the greatest
<PAGE>
CUSIP No. 146875109 Page 37 of 38 Pages
stock market surge in American history, the price of Carver's shares has
actually fallen, from $10 in late 1994 to $8.25 as of Friday.
At the last two annual shareholder meetings, more than a quarter of
those who voted favored a shareholder's proposal to try to sell the bank. The
shareholder, Joseph Sonnenberg, a Manhattan retiree who lives off his
investments, said he planned to offer the proposal again this year. The bank, he
said, "has to prove a lot and I don't want to wait around that long."
He is not the only one. Martin J. Whitman, one of Wall Street's most
seasoned investors, is Carver's biggest shareholder, with almost 10 percent of
the shares. "The African-American community needs some way to have a financial
institution to call their own," he said. But he added, "Obviously I have no
reason to be terribly supportive of the old board or the new C.E.O."
Then there is Mr. Cohee, who owns about 7 percent of Carver's shares
and wants to join the board. He said he was not married to the idea of merging
Carver with his Boston Bank of Commerce, which is much smaller but far more
profitable. But things need to change, he said.
"I have a responsibility as an African-American who runs a community
development institution and knows what impact this type of institution has on
its community to see that the bank is strong enough to support the dreams and
aspirations of its community," he said. "If it isn't in a position to be
effective, many people are hurt by that failure."
No one is predicting that the bank will fail; for one thing, Federal
regulators now have a mandate to preserve minority-owned institutions. But
whether Carver can stay independent and thrive is unclear, especially if the
economy turns sour or interest rates rise.
Other minority-owned banks around the country, facing many of the same
problems and faced with the need to raise money that Carver had in the early
1990's, are watching the bank carefully, hoping that it will become a successful
prototype for the minority-owned bank of the future. "They're sort of paving the
way in a lot of areas right now," said Bob Adkins, senior vice president of the
Broadway Financial Corporation, which owns a $140 million minority-run savings
bank in Los Angeles.
And even those who have sometimes been unhappy with the bank are
rooting for it now. "Carver is critical to the growth and development of Harlem,
the Harlems of New York City," said Mr. Williams of the Chamber of Commerce.
"And if you believe Langston Hughes, as goes Harlem, so goes black and Hispanic
America."
<PAGE>
CUSIP No. 146875109 Page 38 of 38 Pages
http://www.nytimes.com
GRAPHIC: Photos: Deborah C. Wright, the president of Carver Federal Savings
Bank, has inherited a struggling minority-owned financial institution. She
concedes that the bank is at least 15 years behind the times. (Ozier
Muhammad/The New York Times)(pg. 21); Kevin Cohee, chief of the Boston Bank of
Commerce, wants a merger with Carver. (The Boston Globe)(pg. 26)
LANGUAGE: ENGLISH
LOAD-DATE: July 11, 1999
