NEW YORK--(BUSINESS WIRE)--Charles Burnett III, an investor and philanthropist, today issued an "Open Letter to the Shareholders of Regions Financial Corp." (NYSE: RF) in advance of the company's Annual General Meeting (9 a.m., May 16, 2013, Upper Lobby Auditorium, Regions Bank, Birmingham, Alabama) to bring attention to management's failure to properly oversee its legal affairs. The letter cautions shareholders on accepting without question the election of the Board of Directors and the combining of the Chairman and CEO roles at the company.
"Management and the Board have responsibility for all of the company's conduct both in and outside of the courtroom and for the purposeful use of shareholders’ money. It is the opinion of Mr. Burnett that management and the Board have failed in that responsibility," said Montieth M. Illingworth, spokesman for Mr. Burnett. "Mr. Burnett feels strongly that his fellow shareholders should be aware of the company's conduct."
The Open Letter references a legal dispute with the bank in which Mr. Burnett prevailed against Regions on securing legal title to a classic racing boat. Regions, which holds a lien against the boat, has refused to accept the Court's decision and has pursued a legal strategy of harassment and intimidation against Mr. Burnett at a considerable cost to shareholders. The cost in legal fees for Regions now exceeds the value of the boat.
Importantly, blind pursuit of this matter against Mr. Burnett could have historic, negative consequences for the entire banking industry. A federal judge ruled in favor of Mr. Burnett on buyer vs. lender protections and defenses (Burnett III v. Sullivan, et al., 2012 WL 4226404 *8 (S.D., Fla. Sept. 5, 2012)). Crucial precedent has now been set that could be adverse to any bank, or financial institution, providing mortgages for maritime vessels in Florida – when the buyer “in the ordinary course of business” pays in good faith but is defrauded by the seller he may still get legal title to the boat regardless of the lien-holding lender’s own losses on the loan.
Mr. Burnett is an investor and a philanthropist. He has business and financial interests in the U.S., Canada, the U.K., and other countries. His foundation, The Notsew Orm Sands Foundation, funds a wide variety of causes, including medical research and education. Mr. Burnett is also a long-time racing boat enthusiast. He set up Vulture Ventures, a U.K.-based offshore racing team, which soon became known as the world’s most successful team in the sport. Mr. Burnett achieved a variety of world records using catamarans and mono-hulls powered by diesel, petrol and LPG. He was included in the Guinness Book of World Records in 1999 for an offshore water speed record of 137mph. On August 25th, 2009 Mr. Burnett successfully broke the land speed record for a steam powered car – which has stood for 100 years – achieving a speed of 151mph.
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An Open Letter to the Shareholders of Regions Financial Corp.
May 14, 2013
Dear Fellow Regions Bank Shareholders:
As a shareholder in Regions Financial Corp. I am as pleased as you are with management’s success generating returns over the last year. The stock’s significant appreciation in that time period is admirable. We all know the problems this company faced coming out of the financial crisis. Management’s focus and diligence in serving our interests should be acknowledged. That said, there’s a long way to go: long-term holders will know that the stock’s price is now not much higher than it was some 23 years ago.
I also write to you with deep concerns about the failure of management to properly oversee its legal affairs. This is an issue both of corporate governance and the proper stewardship of an organization which prides itself on its “values” and its “customer-driven strategy.” It is also most acutely an issue of the appropriate use of scarce capital resources.
This matter is worthy of shareholder attention, especially as Regions is asking us at this week’s Annual General Meeting to support its unanimous recommendation to elect all 14 Directors of the Board to a year of service. It is also worthy of attention because Regions has collapsed the role of Chairman and CEO. Research has shown that combining those duties ultimately limits long-term shareholder returns compared to companies that split the roles. I reference here the opinions of Institutional Shareholder Services and Glass, Lewis regarding the same issue at JP Morgan Chase.
Management has engaged me in a legal dispute without any seemingly rational objective. In fact, its sole mission now seems to be revenge and harassment. I was defrauded in the purchase of a classic racing boat. Regions was the lien holder. Predictably, the matter ended up in court. I had to sue Regions to obtain title, which under Florida law was legally mine. Regions then sued me under federal maritime law. I won at trial on the key issue of title ownership, and Regions lost.
That should have been the end of the matter. Indeed, it should have ended long before we went to trial when I offered to settle with a payment that would have done much to make Regions whole on its loan – even though I was the one defrauded and at no time owed Regions any amount of money. And that was the first of several attempts I made to settle. Regions refused every settlement offer and has declined to pursue the original borrower who defaulted. And despite losing on key issues at trial, Regions has continued to litigate the same case in a different jurisdiction. Worse, it is using police state-like tactics to break down doors under cover of darkness to repossess a boat Regions does not have legal title to. Regions’ conduct on this matter seems to have no commercially reasonable motive. Regions appears intemperate. It has spent far more money in legal fees now than the boat is worth. All I want to do is enjoy my boat.
Regions Bank had its day in court. Its further pursuit of this matter opens management up to being accused of abuse of judicial process. Worse, Regions’ blind pursuit of this matter against me could have historic, negative consequences for the entire banking industry. A judge ruled in my favor on buyer vs. lender protections and defenses. The federal law Regions evoked against me (the Federal Ship Mortgage Act) does not take away the rights of boat buyers in Florida in my circumstances. Crucial precedent has now been set that could be adverse to any bank, or financial institution, providing mortgages for maritime vessels in Florida – when the buyer “in the ordinary course of business” pays in good faith but is defrauded he may still get legal title to the boat regardless of the lender’s own losses on the loan.
Regions Bank has spent hundreds of thousands of dollars in legal fees with nothing to show for it. In a cruel twist of hubris against Regions’ intemperate legal strategy, it has undermined the protections afforded its industry in maritime lending. It is time for management to call it a day and focus instead on continuing to generate shareholder returns for the long term. Whichever way you vote on the Election of Directors this week be mindful that the Board is responsible for all of the company’s conduct – both outside and inside the court room.
Yours respectfully,
Charles Burnett
For more information on this matter, contact Montieth Illingworth at 212.284.7625 or montieth@montiethco.com