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N.J. court slaps DOBIs wrist over bank ruling

Seeks details on 2007 decision by year’s end.An appellate court Monday morning chided a “cryptic” decision previously handed down by the state Department of Banking and Insurance in a dispute involving an activist shareholder. The ruling delayed a decision in the long-running case of Lawrence B. Seidman v. Spencer Savings Bank et al, and asked DOBI for a more detailed explanation of the earlier decision.

The case centers on Spencer Savings Bank’s attempts to rebuff the efforts of Lawrence B. Seidman, a Parsippany investor, to gain a seat on the board of the Elmwood Park-based institution. Spencer Savings is a mutual savings-and-loan association owned by its depositors.

According to court records, Seidman “on several occasions” discussed his attempts to convert Spencer to a publicly traded stock corporation, and has previously tried to gain control of several other banking institutions.

Until 2004, those who wanted to run for Spencer’s board needed to secure the votes of at least 10 percent of the bank’s depositor-owners. But in that year, the board raised the threshold to 20 percent because its chief executive, José B. Guerrero, “was concerned that the institution needed protection from investors such as Seidman, who might seek to take the association public,” according to court documents.

In October 2004, Seidman sued the bank, alleging that board members wanted “to entrench themselves,” and “were purposefully interfering with members’ voting rights.”

In September 2007, the bank did reduce the voting threshold to 15 percent, an action that was approved by the DOBI commissioner.

Court papers did not name the commissioner, but according to DOBI’s Web site, Steven M. Goldman served in that position during that time.

A month later, a lower court bounced Seidman’s claim, noting “it is now within the province of the Commissioner of Banking [and Insurance] to review the bylaws and resolutions adopted by the Spencer Savings Bank’s board of directors.”

Seidman appealed that ruling, calling the commissioner’s decision “arbitrary and capricious.” In Monday’s decision, the appellate court found that “the one-page decision ultimately issued by the department in September 2007 is simply too conclusory and cryptic.”

Rather than “guess at why the department” approved the 15 percent change, the appellate court asked current banking Commissioner Neil N. Jasey to submit a “detailed statement of reasons” behind the decision by Dec. 31.

DOBI spokesman Marshall McKnight said the department would have no comment on the fresh ruling until a review could be completed.

E-mail Martin C. Daks at mdaks@njbiz.com