Metropolitan Mortgage & Securities Inc. will try to chart a course through bankruptcy reorganization without a board of directors.
Every member of the beleaguered company’s board agreed Monday to resign, if a federal bankruptcy judge approves.
The move, which is designed to help the Spokane financial firm reorganize quickly, would erase decades of company experience. It would mark the final ouster of C. Paul Sandifur Jr. from the company his father founded 51 years ago.
Sandifur resigned in January as chairman and chief executive officer, but had retained his board position.
The resignations would dovetail with the appointment of a chief restructuring officer - a turnaround specialist with broad executive powers.
The board’s independence has been questioned by the U.S. Securities and Exchange Commission and the Washington Attorney General’s Office. Upset investors accuse the directors of rubber-stamping business decisions that have driven Metropolitan into bankruptcy.
The alleged shortcomings have dragged individual directors into court for failing to protect investors from unwise business decisions.
William Smith, Metropolitan’s chief financial officer, said the resignations would speed Metropolitan’s rebound.
The company hopes to clean up accounting discrepancies, settle on a stable business strategy and give ownership of a reorganized company to creditors - namely the thousands of investors who hold unsecured bonds called debentures.
Smith said this can be done without the oversight of a board.
“Everyone is focused on returning maximum value to investors,” he said.
Including its Idaho sister company Summit Securities Inc., Metropolitan has about $572 million in assets and $582 million in liabilities.
The figures do not include the insurance subsidiaries where a majority of Metropolitan’s assets are held under the supervision of Washington state regulators.
Part of the shake-up includes the resignation of Irv Marcus as chairman, president and chief executive officer.
Former City Councilman Steve Corker will resign his board seat and position as chief administrative officer of Metropolitan.
He will keep his position as chairman of Metropolitan’s insurance affiliate Western United Life Assurance Co.
Marcus and Corker will forgo their $252,000 salaries outlined in bankruptcy court papers last week, although Corker will still be paid for his work with Western United.
Both men assumed the jobs in January when Sandifur stepped down.
Taking over as restructuring officer would be William Romney. He is with Alvarez & Marsal, a New York firm that works with troubled companies.
As restructuring officer, Romney would work closely with the bankruptcy court and creditors.
Also, Romney would be a member of a reorganization committee along with CFO Smith, corporate attorneys Michael Agostinelli and Lynn Ciani, and Dale Whitney, president of Metropolitan’s three insurance affiliates.
Metropolitan has lost money in three of the last four years. Some losses are attributable to Met West, a subsidiary that lent money to risky borrowers; it failed in 2000.
The struggles intensified last year when Metropolitan fell under close scrutiny of the SEC.
Regulators had long been concerned about Metropolitan’s growing reliance on issuing new rounds of preferred stocks and debentures to repay older debts and fund new business ventures.
In January 2003, the SEC more closely scrutinized Metropolitan’s financial condition and wouldn’t allow the firm to sell more securities. Metropolitan then began to unravel.
It didn’t make enough money to pay its bills. Investors that had depended on Metropolitan’s success were left holding paper that suddenly wasn’t paying interest or dividends.