Finance Enterprises sued by group of shareholders
Finance Factors' bank plan is challenged
Marvin Fong and a group of other shareholders of Finance Enterprises Ltd. have filed a suit to stop plans to convert subsidiary Finance Factors into a commercial bank.
Fong, the estranged son of the late U.S. Sen. Hiram Fong, and the shareholders' group, NVC Limited Partnership, filed the suit in First Circuit Court on Wednesday, also seeking the dismissal of six of the 13-member board of directors.
The lawsuit claims that the directors misused corporate assets, paid themselves excessive salaries while not paying dividends to shareholders, withheld corporate information and blocked shareholders from selling their stock.
Del Wong, attorney for Finance Enterprises, said that the allegations are without merit.
A group of shareholders of Finance Enterprises Ltd., including the estranged son of the late U.S. Sen. Hiram Fong, are suing to prevent the proposed conversion of subsidiary Finance Factors into a commercial bank.
Two shareholders under the NVC Limited Partnership, as well as Marvin Fong and his wife, Sandra, who collectively control about 19 percent of the company's stock, filed a lawsuit Wednesday in 1st Circuit Court also seeking the dismissal of six of the company's directors, including Finance Enterprises' chief executive Russell Lau.
Among the allegations in the lawsuit are claims that the directors misused corporate assets, paid themselves excessive salaries while not paying dividends to shareholders, withheld corporate information and blocked shareholders from selling their stock.
"Management has been keeping secret everything about what it's been doing from these major shareholders," said Judith Ann Pavey, attorney for the plaintiffs. "It is ridiculous. We are very suspicious of a cover-up here, and we're concerned about the impact on the customers as well as on us."
The other directors named as defendants are Daniel Lau, Jeffrey Lau, Patrick Chun, Patsy Chun and Sam Yee, who were elected in 2005.
The suit claims that the defendants have withheld necessary information for stock- holders to make an informed decision on the proposed conversion plan and have delayed annual shareholder's meetings to elect directors for nearly two years, even though the company's bylaws require a meeting to elect new directors within 90 days of the close of its fiscal year.
Lau didn't return calls for comment. Del Wong, attorney for Finance Enterprises, said that the allegations are without merit.
Finance Enterprises in an emailed statement said that the company has not received the complaint and is unaware of the specific allegations.
"These issues will not affect our conduct of business as usual and customers can expect the same great service we always provide," the company said.
One of the issues especially troublesome to shareholders was the rejection by Finance Enterprises' management of a buyout offer last October from California-based TFC Holding Inc.
Management -- namely Lau -- rejected TFC's unsolicited offer to purchase at least 51 percent of the company's nearly 62,000 shares at $1,000 a share without disclosing the offer to shareholders, the lawsuit said.
"We didn't get one penny in dividends for 10 years," Pavey said. "My clients have wanted to get out of the company. They have huge investments and are not making money out of it -- they don't trust management and they want out."
The suit also claims that management furthered a plan to oppress minority stockholders by using $3 million in company assets to buy some of the late Sen. Fong's shares in foreclosure and bankruptcy proceedings to block TFC's bid to buy the shares.
The result was that shareholders weren't able to sell their stock at a reasonable price to TFC, which wanted to purchase the shareholders' stock contingent upon acquiring Fong's shares, the suit said.
Finance Factors, a privately-held loan company created in 1952 by the late Sen. Fong and five other partners, last year announced that it wanted to convert into a full-service bank.
Under its current charter, Finance Factors offers real estate-secured residential and commercial loans, savings-secured loans, federally insured savings accounts and several investment vehicles.
NVC and the Fongs, whose collective stock value totals about $12 million, recently sued Finance Enterprises for a court order forcing the company to hold a shareholder's meeting to elect new directors. The meeting is scheduled for Saturday.