Pacific Coast Business Times Proudly serving Ventura, Santa Barbara and San Luis Obispo counties Tue, 22 Jul 2014 23:23:24 +0000 en-US hourly 1 New Yorker faces SEC charges over Clean Diesel trades Tue, 22 Jul 2014 18:57:54 +0000 A New York investor relations executive has been charged with insider trading for using knowledge gained preparing press releases for Oxnard-based Clean Diesel Technologies for personal profit.

The U.S. Securities and Exchange Commission alleged that Kevin McGrath bought stock in Clean Diesel Technologies when he learned about the company’s impending announcement of positive news and profited when its stock price nearly doubled. The SEC made no suggestion of any wrongdoing on the Clean Diesel’s part, and the company told the Business Times that it is no longer doing business with McGrath’s employer.

“Investor relations firms owe their clients a duty to maintain in strict confidence the important and sensitive information that clients impart for the sole purpose of obtaining help and advice on how best to communicate forthcoming news to investors,” Andrew M. Calamari, director of the SEC’s New York regional office, said in a release. “McGrath’s self-centered misconduct betrayed both his own firm and his firm’s clients whose confidential information he exploited for personal gain.”

The SEC alleged that McGrath worked on a press release in which Clean Diesel announced an order of $2 million in May 2011. Minutes after finding out that the press release was slated to run the next day, McGrath purchased 1,000 shares of Clean Diesel stock. The stock price rose 95 percent on the positive news. McGrath sold all of his Clean Diesel shares soon afterward and made $6,376 in profits.

McGrath also avoided losses on another company’s stock using insider information, the SEC alleged.

McGrath agreed to settle the charges by paying a disgorgement of $11,776, prejudgment interest of $1,492 and a penalty of $11,776 for a total of $25,044, the SEC said. McGrath neither admitted nor denied the allegations, but did agree not to violate insider trading rules again. The settlement still needs court approval.

The McGrath case is the second prominent instance of service providers betraying the trust of publicly traded companies in the Tri-Counties. Last year, regulators alleged that KMPG partner Scott London leaked inside information about Deckers Outdoor Corp. and Pacific Capital Bancorp to a friend who traded on the information. London pleaded guilty and was sentenced to 14 months in prison earlier this year.

[Editor's note: This story was updated with comments from Clean Diesel at 1:24 p.m. on July 22.]

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Allergan to shutter Goleta facility, cut 300 jobs Tue, 22 Jul 2014 14:51:25 +0000 Allergan will close its Goleta facility and eliminate about 300 positions there as part of a broader cost tightening effort as the Irvine company fends off a hostile takeover attempt.

Allergan makes Botox and other cosmetic drugs and devices. The company became a major South Coast employer in 2005 when it bought breast implant maker Inamed in a $3 billion deal.

Allergan faces a $53 billion takeover bid from Canadian Valeant Pharmaceuticals International and hedge fund manager Bill Ackman.

Valeant proposed to Allergan shareholders that it would cut Allergan’s workforce and refocus drug research on more profitable efforts. During its quarterly earnings announcement, Allergan disclosed similar moves July 21 in a bid to persuade shareholders it could make the proposed reforms on its own.

Allergan said that it will eliminate 13 percent of its global workforce, or about 1,500 jobs. It will also cut 250 vacant positions. The moves are expected to generate savings of about $475 million starting next year.

Allergan spokeswoman Bonnie Jacobs confirmed that the company plans to close its Goleta facility as part of “internal cost and workforce reductions in order to continue to deliver high value to our stockholders.”

Allergan said diluted earnings per share for the quarter were $1.37, up from $1.17 a year earlier. Net product sales were up 15.9 percent to $1.8 billion compared to a year earlier.

Allergan shares were trading at about $172 in midday trading July 22, up from a $171.14 close the previous day.

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Community West Bank COO dies Mon, 21 Jul 2014 22:23:49 +0000 Michael Phlaum, chief operating officer at Goleta-based Community West Bank, died Friday evening from complications related to a stroke, the bank said on July 21.

Phlaum joined the bank in February 2012 and was promoted to COO and executive vice president in February of this year.

“This is a tragic loss for me personally and all of us here at the company,” Community West CEO and President Martin Plourd said in a statement. “In this period of extreme mourning, our prayers and thoughts and deepest condolences go out to Mike’s wife Barbara and his beloved family. Mike’s positive spirit, enthusiasm and commitment will be greatly missed by all of us who had the honor of working with him. Mike was well respected by everyone here and the bank’s customers with whom he worked so passionately to serve.”

Plourd and other members of the bank’s management team will perform the COO duties on an interim basis, the bank said.

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Santa Clara Valley Bank to be sold in $15.3M deal Fri, 18 Jul 2014 17:51:24 +0000 Santa Paula-based Santa Clara Valley Bank is being acquired by Sierra Bancorp for $15.3 million in an all-cash deal announced July 17.

The Ventura County bank operates branches in Fillmore, Santa Paula and Valencia. With assets of about $127 million, the bank is the second-smallest bank headquartered in the Tri-Counties.

Porterville-based Sierra Bancorp is the $1.5 billion parent company of Bank of the Sierra. The firm noted the strength of Ventura County’s agriculture sector and the proximity of the Santa Clara Valley to its primary market, the Southern San Joaquin Valley, as features that made the deal attractive.

“The market is very similar to the region we already serve, and this opportunity is a natural extension for us,” Sierra Bancorp CEO James Holly said in a statement. “In addition, beyond the Santa Clara Valley, we believe that we can serve the commercial and residential communities of Ventura, Oxnard and Santa Clarita.”

The acquisition, which has been approved by the boards of both banks, includes $12.3 million in cash, or $6 per share, to common shareholders, and $3 million to preferred shareholders to retire outstanding preferred stock and warrants.

The deal still needs shareholder and regulatory approval.

Sierra Bancorp has 25 branches in California and operates real estate and agricultural lending centers in the state, as well as a Small Business Administration loan center in the Central California region.

“Bank of Sierra is large enough to offer a wide variety of products and services, but small enough to remain a community bank dedicated to serving its customers and communities,” Santa Clara Valley Bank President and CEO Cheryl Knight said in a statement. “This transaction should also preserve many local jobs.”

The proposed purchase price represents 109 percent of Santa Clara Valley Bank’s book value as of March 31, Sierra said. Santa Clara Valley Bank shares, traded over the counter, closed at $4.72 on July 17 before the deal was announced. The bank’s shares shot up to $5.70, a 20.8 percent surge, in midday trading on Friday.

The deal “not only provides high value to the shareholders, it also ensures a high quality community bank is here to support our customers,” Santa Clara Valley Bank Chairman Leslie Cornejo said in a statement.

Santa Clara Valley Bank lost $153,000 in 2013 after turning a $558,000 profit in 2012. The company has 38 full-time equivalent employees, according to its regulatory filings.

Sierra said it expects the deal to be immediately accretive to its earnings and that it will yield an internal rate of return of more than 20 percent.


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PennyMac counts on family, Countrywide ties Fri, 18 Jul 2014 07:03:28 +0000 pennymacWEB1

PennyMac’s headquarters at 6101 Condor Drive in Moorpark. (Austen Hufford / Business Times photo)


PennyMac, the Moorpark-based firm founded by former top brass at Countrywide Financial Corp., has inked a $550 million loan repurchasing deal with Bank of America.

The deal forms a half-billion-dollar pact among three companies that have been intimately connected since shortly after Countrywide, the firm at the heart of the subprime loan meltdown, was sold to Bank of America in 2008.

Under the terms of the July 14 deal, a subsidiary of PennyMac’s mortgage trust will sell newly originated home loans to Bank of America, with the Moorpark firm potentially repurchasing them later.

The transaction highlights a set of companies whose management and businesses are so thoroughly intertwined that regulators have questioned ties to Countrywide and some investors have objected to executive pay.

On paper, PennyMac is two companies packed with former Countrywide staff. But the PennyMac firms do business heavily with each other, and the largest single repurchase agreement so far is with Bank of America, where Countrywide’s assets landed after it teetered on the brink of failure.

The overlapping ties at PennyMac range from the company’s highest levels all the way down to its cafeteria. John Taylor, who also serves as a director at Wilshire Bancorp, recently resigned from the board of directors at PennyMac Financial Services to maintain compliance with a 1978 law aimed at preventing interlocks among executives at banking firms. And PennyMac’s cafeteria is run rent-free through a contract with CEO Standford Kurland’s daughter and the wife of another company executive.

Two firms, one business

PennyMac CEO and Chairman Stanford Kurland, formerly of Countrywide Financial Corp. (PennyMac handout photo)

PennyMac CEO and Chairman Stanford Kurland, formerly of Countrywide Financial Corp. (PennyMac handout photo)

PennyMac Mortgage Investment Trust is a real estate investment trust, or REIT. The company buys troubled loans from banks, often for pennies on the dollar, and tries to make a profit on them either by working with homeowners on alternatives to foreclosure or securitizing the loans and selling them. It also buys newly originated mortgages from correspondent lenders. It went public in 2009, shortly after the Countrywide sale to Bank of America, and now has a market capitalization of $1.6 billion.

Its sister firm, PennyMac Financial, is run by the same CEO and chairman and acts as an outside investment manager for the REIT, from which it collects fees.

CEO Kurland’s 11 percent voting stake in PennyMac Financial has raised questions about potential conflicts of interest and his fiduciary duties to investors in the REIT. What isn’t in doubt is Kurland’s success at building out two hugely profitable mortgage ventures.

The PennyMac REIT earned $200.2 million on $405.5 million in net investment income in 2013, marking a 45 percent profit gain over 2012.

PennyMac Financial, which shares an executive team, chairman and headquarters building with the trust, has a market capitalization of $326 million after going public last year. The financial services firm notched a $172.2 million profit in 2013, up 45 percent over the previous year. About one-third of PennyMac Financial’s $386.6 million in revenue last year came from fulfillment and loan-servicing fees charges to the REIT.

The  Kurland family is the third-largest controlling shareholder in PennyMac Financial, just after Wall Street giant BlackRock and Boston-based HC Partners. Billionaire hedge fund manager Leon Cooperman is also a major investor.

Both PennyMac firms were founded by Kurland, the former president at Countrywide Financial, the largest subprime home lender in the U.S. until its near-collapse in 2008. Kurland received more than $8 million in total compensation between the two PennyMac jobs last year.

In addressing questions about Kurland’s dual roles and his fiduciary duties at the two firms, the REIT has said it believes it “has in place the proper agreements, controls and oversight to mitigate potential conflicts in its relationship” with the financial services firm.

The Securities and Exchange Commission, in a letter to the financial services company after it announced plans to go public last year, probed the firm on Kurland’s former high-profile role. “We note your disclosure regarding the advantages of your seasoned management team, including your CEO who was previously president, CFO, and COO of Countrywide Financial Corp., and several other former senior managers of Countrywide,” regulators said in a March 2013 letter to the company’s legal team. “Please tell us what consideration you have given to including a risk factor that addresses the failures of Countrywide while under the management of these individuals, including but not limited to recent and ongoing litigation.”

Major employers

The PennyMac firms are run out of the same building on Condor Drive in Moorpark, not far from the former Countrywide headquarters in Calabasas.

In just a few years, PennyMac Financial Services has hired more than 1,000 corporate employees, making it the largest employer in Moorpark, a city in East Ventura County that has long been a financial services hub.

Deep-rooted connections run between PennyMac, Bank of America, Countrywide and some of Wall Street’s largest players. PennyMac Mortgage and PennyMac Financial share the same set of 10 executives, seven of whom hail from Countrywide. Four have also worked for Bank of America, and two were previously at BlackRock, the New York firm that owns a 22 percent voting stake in PennyMac Financial Services.

The PennyMac firms have cautioned investors that their Countrywide roots could come back to haunt them. In the financial services firm’s annual statement, it warns of the “potential damage to our reputation and adverse impact to our business resulting from the ongoing negative publicity focused on Countrywide Financial Corp., given the former association of certain of our officers with that entity.”

Countrywide became the largest U.S. home lender in part by offering complicated subprime mortgages to people with the weakest credit. Losses on troubled loans drove the firm to the brink of failure until Bank of America purchased the firm for $2.8 billion in 2008, a deal widely viewed as a forced marriage prompted by regulators. Bank of America has since absorbed tens of billions of dollars in costs related to the Countrywide rescue.

In a 2010 settlement with SEC, Countrywide founder and former CEO Angelo Mozilo paid a $67.5 million fine and agreed to a lifetime ban prohibiting him from serving as an executive or director of a publicly traded company. The deal with securities regulators settled wide-ranging charges that Mozilo had misled investors, engaged in insider trading and profited from “ill-gotten gains.”

Kurland, who has never faced any regulatory action for his role at Countrywide, served more than two decades with the mortgage giant until his departure in 2006, when he cashed out more than $200 million in stock.

Me N U, and Kurland too

A closer look at the Moorpark firms’ regulatory filings reveals close relationships between several of the companies’ top leaders. PennyMac Financial Services employs Kurland’s brother-in-law, Robert Schreibman, as its senior vice president of asset management, a role in which he received a base salary of $242,288 last year.

The brother of Chief Investment Officer Vandad Fartaj is also a high-profile employee of the firm. In his role as PennyMac Financial’s senior vice president for mortgage trading, Vala Fartaj receives a base salary and bonus of $328,152.

And for lunch, Kurland can stroll down to the company cafeteria, which is operated by Me N U Kitchen. The food service business is co-owned by his daughter, Ashley Rubinstein, and Marci Grogin, the wife of PennyMac Chief Administrative and Legal Officer Jeffrey Grogin. Me N U operates the eatery rent-free, regulatory filings show, and PennyMac covered more than $150,000 of its operating costs last year.

[Correction, July 21, 2014: The July 18 story about PennyMac did not clearly state that the company's largest repurchase agreement is with Bank of America; in addition, investors have objected to executive pay, not Countrywide ties. John Taylor, a director at Wilshire Bancorp, resigned from the board of  PennyMac Financial Services, the company that has become the largest employer in Moorpark. Two members of the executive team shared by the firms served previously at BlackRock. The voting interests of Blackrock and Stanford Kurland in PennyMac Financial Services are 22 percent and 11 percent, respectively, which differs from their reported beneficial ownership of Class A common stock because of a dual-class share structure. When the Business Times contacted the PennyMac firms for the story, it did not seek comment on these items.]

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Network Hardware Resale becomes Curvature as strategy shifts Fri, 18 Jul 2014 07:02:51 +0000


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Santa Maria, remixed: City looks for winning formula Fri, 18 Jul 2014 07:02:30 +0000


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