Solera in Colorado Fires Back in Proxy Battle

Solera National Bancorp (SLRK) is firing back against two investors seeking control of the Lakewood, Colo., company's board.

President and Chief Executive John Carmichael in an April 25 letter openly dismissed the challenges of Michael Quagliano and Kathleen Stout, who are separately proposing alternate board nominees.

Quagliano, who owns 23.3% of the $170 million-asset company's stock, wants to take over six board seats at the May 22 annual meeting. Stout, a former Solera executive, is aiming to replace eight directors.

The letter hits Quagliano and his slate hard, stating that Melissa Allen, Quagliano's fiancé and one of his nominees, listed her main occupation as manager of Rosiano Farm. Her list of qualifications includes three months of basic training with the Israeli Defense Force and the management, logistics and care for show horses, the letter said.

Drew Quagliano, the activist investor's daughter and another nominee, is a student at the University of Colorado, Carmichael writes. The letter added that the younger Quagliano had listed several Microsoft Office programs and equestrian skills among her qualifications.

Michael Quagliano's other nominees are Jackson Lounsberry, a hedge fund manager; Lars Johnson, a lawyer; and Carlyle Griffin, a retired IBM employee.

Carmichael wrote that a seventh nominee ultimately refused to stand for election.

"Quagliano's nominees are profoundly unqualified to lead the company as it seeks to grow its business … and manage the challenges of a complex and changing economic and regulatory environment," the letter said.

The letter also questions the motives behind Stout's challenge. Stout, who has a small stake in Solera, was president of the company's residential mortgage division before being fired in December. Her termination "occurred as part of the company's cost-cutting efforts, which included the elimination of all executive vice president positions," the letter said.

Carmichael said that Stout has been lobbying to get her job back. "In effect... there is no job for her to return to," he wrote. "The board believes that her termination was in the best interests of the shareholders, and that reversing course on this decision, while beneficial to Stout personally, would take the company in the wrong direction."

The letter also claims that Quagliano has told Carmichael that he wants to cut executive compensation by up to 50% and renegotiate Solera's leases.

The board "believes that... Quagliano's strategy is as unrealistic as his nominees are unqualified," Carmichael wrote.

Slashing compensation "would make it difficult, if not impossible, to recruit even minimally qualified candidates," he added. "The departure of the current management team without credible new candidates in place could have serious regulatory implications for the company."