Banc of California: Jason Galanis has no undue influence over company
Staff Writer |
Banc of California issued the update on the independent investigation into previously disclosed blogger allegations.
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Robert D. Sznewajs, current Chair of the Joint Audit Committee and new chairman of the board said: "The matters which were the subject of the Special Committee investigation do not bear upon the company's operating results or financial condition, and Banc of California remains well positioned to continue to fulfill its mission and vision as California´s Bank."
On October 18, 2016, an anonymous blog post raised questions about related party transactions and other issues with respect to the company. As previously disclosed, in response to these allegations, the Board formed a Special Committee which commenced a process to review the allegations.
Shortly thereafter, on October 27, 2016, the company's independent auditor, KPMG, sent a letter to Mr. Sznewajs in his capacity as chair of the company's Joint Audit Committee raising concerns about allegations of "inappropriate relationships with third parties" and "potential undisclosed related party relationships."
On October 30, 2016, the Special Committee retained WilmerHale, a law firm with no prior relationship with the company, to conduct an independent investigation to address certain issues raised by the blog post, as well as questions raised by the KPMG Letter.
In accordance with the KPMG Letter, WilmerHale will make a final report to the Special Committee and KPMG on the results of its investigation. The Special Committee expects that this final report will take place within weeks.
While certain work remains to be completed, to date WilmerHale's inquiry has not found any violation of law.
In addition, contrary to the claims in the blog post, the inquiry has not found evidence that Jason Galanis has any direct or indirect control or undue influence over the company. Furthermore, the inquiry has not found evidence establishing that any loan, related party transaction, or any other circumstance has impaired the independence of any director.
Through the inquiry, however, the Special Committee has determined that a press release issued on October 18, 2016 contained inaccurate statements. In that press release, the company stated that the "Board of Directors, acting through its Disinterested Directors" had, as of October 18, 2016, investigated issues raised in the blog post.
This press release was inaccurate in certain respects. The review established that although an investigation had been conducted, it was not initiated by the Board of Directors; rather, it appears to have been directed by company management rather than any subset of independent directors.
In addition, the press release characterized the investigation as "independent" without disclosing that the law firm conducting the investigation had previously represented both the company and the company's CEO individually.
Furthermore, the press release stated that the Board or a group of "Disinterested Directors" had received "regular reports including related to regulatory and governmental communications."
This overstated both the degree to which the company had been in contact with regulatory agencies about the subject matter referenced in the blog post, as well as the involvement of the directors in oversight or direction of the inquiry.
Related to this matter, on January 12, 2017, the Securities and Exchange Commission (SEC) issued a formal order of investigation directed at certain of the issues that the Special Committee is reviewing.
Also on January 12, 2017, the SEC issued a subpoena seeking certain documents from the company, primarily relating to the October 18, 2016 press release and associated public statements.
The company intends to fully cooperate with the SEC; in addition, the Special Committee will share the results of its review with the SEC staff. ■