Driver Management Company letter to AmeriServ Financial, Inc.
$ASRV
Mr. Adams,
A Form 10-Q must include the information required by Item 103 of Regulation S-K, which requires a registrant to:
Describe briefly any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the registrant or any of its subsidiaries is a party or of which any of their property is the subject. Include the name of the court or agency in which the proceedings are pending, the date instituted, the principal parties thereto, a description of the factual basis alleged to underlie the proceedings and the relief sought.
Both the Company’s Form 10-Q for the perioded ended June 30, 2023 (the “2Q23 10-Q”) and the Company’s Form 10-Q for the period ended September 30, 2023 (the “3Q23 10-Q”) contain the following disclosure:
There are no material proceedings to which the Company or any of our subsidiaries are a party or by which, to the Company’s knowledge, we, or any of our subsidiaries, are threatened. All legal proceedings presently pending or threatened against the Company or our subsidiaries involve routine litigation incidental to our business or that of the subsidiary involved and are not material in respect to the amount in controversy.
However, the 2Q23 10-Q provides:
…..NON-INTEREST EXPENSE…..Non-interest expense for the second quarter of 2023 totaled $13.2 million and increased by $1.1 million, or 8.8%, from the prior year’s second quarter. Factors contributing to the higher level of non-interest expense for the quarter included:
● a $1.1 million, or 127.6%, rise in professional fees due primarily to increased legal and professional fees related to the Company’s recent annual meeting proxy contest and defense against an activist investor. The Company is still involved in ongoing litigation with an activist investor.
Similarly, the 3Q23 10-Q provides:
…..NON-INTEREST EXPENSE…..Non-interest expense for the first nine months of 2023 totaled $37.2 million and increased by $1.9 million, or 5.4%, from the prior year’s first nine months. Factors contributing to the higher level of non-interest expense for the nine-month period included:
● a $1.9 million, or 80.5%, rise in professional fees due primarily to increased legal and professional fees related to the defense against an activist investor and a proxy contest at the 2023 annual meeting. These costs amounted to $2.0 million for the first nine months of 2023. As expected, costs related to the activist shareholder issue declined meaningfully between the second and third quarters of 2023 by $828,000. However, given a recent increase in activity by the activist investor, the Company cannot determine at this time whether these costs will remain at a lower level in the fourth quarter of 2023;
In addition, on June 6, 2023, AmeriServ Financial Inc. (“AmeriServ” or the “Company”) filed a complaint (the “Complaint”) in the United States District Court for the Western District of Pennsylvania against Jack Babich, the Company’s former Senior Vice President for Human Resources initiated legal proceedings referred to as the “Babich Litigation.”
The Complaint states, in pertinent part:
Plaintiff AmeriServ Financial, Inc. brings this action against its former Senior Vice President for Human Resources, Jack Babich, for breach of his severance agreement for divulging confidential Company information, including sensitive and private personnel information about another former AmeriServ employee, which information was largely inaccurate, to AmeriServ shareholder Driver Opportunity Partners I, LP (“Driver”) in connection with Driver’s efforts to obtain Company books and records and wage a proxy solicitation contest against the Company for board of director seats.
Based on the above, it would appear that the Company is party to several material legal proceedings as to which insufficient or non-existent disclosure has been made in periodic reports filed by the Company with the Securities and Exchange Commission. The Company’s failure to comply with its reporting requirements raises obvious questions regarding the Company’s internal controls. More to the point, however, the Company’s failure to comply with disclosure requirements regarding litigation suggests that the Company, more specifically its board of directors (the “Board”), is trying to conceal from shareholders the vast sums and efforts being spent by the Company to further entrench a Board that has overseen decades of poor performance and mismanagement.
Please advise when corrective disclosures will be made.
/s/ Abbott
Source:
https://www.sec.gov/Archives/edgar/data/707605/000092189523002749/dfan14a12447006_12122023.htm