SEC looking at deal backed by Commerce Two board members of the banking company were part of a group that purchased U.S. Vision for $32.5 million last year, using loans and credit from Commerce. Sources say the SEC is examining whether disclosure rules were followed. By Wendy Ruderman and Angela Couloumbis INQUIRER STAFF WRITERS POSTED: April 18, 2003 The U.S. Securities and Exchange Commission is looking into a business deal involving two board members of Commerce Bancorp Inc. who were part of a group that purchased a leading optical company last year with $32.5 million in loans and credit from Commerce Bank, according to two federal sources familiar with the matter. The SEC is examining whether the U.S. Vision transaction - brokered by some of New Jerseys most influential political players and backed by financing from one of the regions fastest-growing banks - complied with securities laws, including rules governing disclosure to shareholders, the sources said. The SEC, which enforces laws designed to protect investors and maintain the integrity of the securities market, neither confirmed nor denied that it was looking into the matter, citing agency policy. Generally, if the agency spots a possible violation, it launches a formal investigation. If not, it closes the matter without action. The investment group that bought U.S. Vision in October included a virtual whos who of New Jerseys political and business scene: Democratic power broker George E. Norcross 3d; his brother, Philip A. Norcross; state Assemblyman Joseph J. Roberts Jr. (D., Camden); and U.S. Visions founder and chief executive officer, William A. Schwartz Jr. Both Schwartz and George Norcross are also on Commerce Bancorps board of directors. An attorney for the investment group said this week that the transaction had not violated SEC rules. Arthur Makadon, the attorney representing Commerce Bancorp, George Norcross, and Norcross investment group, said this week that the company had done nothing wrong and was not aware that the SEC was looking into anything. We have no basis for believing the SEC is doing anything with respect to this transaction or anything else, said Makadon, managing partner at Ballard, Spahr, Andrews & Ingersoll. We think The Inquirer is being utterly irresponsible for running this story. Norcross and Roberts would not comment. According to disclosure statements that U.S. Vision filed with the SEC in September, Norcross investment group believed that the U.S. Vision purchase was an attractive, although risky buy. U.S. Vision, the nations sixth-largest retail optical company, operates more than 600 outlets, primarily in J.C. Penney and other department stores, in the United States and Canada. The company had fallen on hard times after the Sept. 11, 2001, terrorist attacks. It closed more than 80 stores, reduced staff, and froze wages. By late December 2001, U.S. Visions stock was trading at $1.83 per share - down $2.42 from the 2001 high of $4.25. From the start, the proposed U.S. Vision sale presented a number of potential and actual conflicts that the company believed stockholders should know about, U.S. Vision documents filed with the SEC in September 2002 state. U.S. Vision detailed those conflicts to shareholders before they voted to allow Norcross investment group to buy out their shares and take the company private. The two federal sources said the SEC has been exploring whether Commerce Bancorp was required to disclose any of those same details to its shareholders. U.S. Vision disclosed to shareholders before they voted that: U.S. Vision already owed money to Commerce Bank N.A. - a subsidiary of Commerce Bancorp - through a $20 million line of credit extended in 1996. By the spring of 2002, the company had tapped $8.5 million. Schwartz had ties to both sides of the deal. At the time of the sale, he headed U.S. Vision, sat on U.S. Visions board of directors, was a shareholder in U.S. Vision, and was part of Norcross investment group looking to buy U.S. Vision. Schwartz was also a member of Commerce Bancorps board. Norcross, a leading member of the group buying U.S. Vision, also had a seat at both sides of the table. Like Schwartz, Norcross was a board member of the seller, U.S. Vision, as well as a significant stockholder in U.S. Vision. And, like Schwartz, Norcross was a board member of Commerce Bancorp. (Commerce Bancorps directors voted him onto the board on March 19, 2002. It was the same day that Commerce Bank informed Norcross group that it had approved the $32.5 million in financing to the group - a $17.5 million line of credit and a $15 million loan, U.S. Vision records show.) Norcross ran Commerce National Insurance Services Inc., a subsidiary of Commerce Bancorp. At the time of the sale, his insurance company provided U.S. Vision with insurance brokerage services. Philip Norcross headed a law firm, Parker McCay & Criscuolo, that provided substantial legal services to at least two subsidiaries of Commerce Bancorp: Commerce Bank, which was supplying the loan, and Commerce Capital Markets, an investment-consulting firm. Commerce Capital Markets was acting as the financial adviser to U.S. Vision, helping to determine whether offers by potential buyers - including Norcross group - were fair. U.S. Vision was initially using the Philadelphia firm of Janney Montgomery Scott as its financial adviser. In the midst of negotiating with suitors, the main contact at Janney left to work for Commerce Capital, and soon after, in early 2002, U.S. Vision hired Commerce Capital. Around the same time, a Scotland-based company called Optical Express was courting U.S. Vision. Optical Express was offering $4.75 a share in cash to buy out U.S. Visions shareholders. Norcross investment group, which already owned 26 percent of U.S. Visions stock, was offering $4.25 per share in cash - 50 cents less per share than Optical Express. But unlike its competitor, Norcross group had the promise of financing - a letter of intent from Commerce Bank, dated Feb. 25, 2002, according to public disclosures U.S. Vision made to the SEC. Commerce Capital advised U.S. Visions board in the spring of 2002 that it believed the offer from Norcross group was fair. At the time, U.S. Vision stock was selling for $3.40 per share - 85 cents less than the $4.25 per share that Norcross investment group was offering. U.S. Visions board voted May 14, 2002, to accept the offer, largely because the group had a financing commitment from Commerce Bank, records show. As both the prospective buyers and as directors of U.S. Visions eight-member board, George Norcross and Schwartz abstained from voting. Roberts - also a U.S. Vision board member - abstained from the vote as well. U.S. Vision stockholders then voted to sell their shares to Norcross group, which then took the company private. In a written statement last night, Makadon said: The U.S. Vision loan was made in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with other persons and, indeed, is a public record. The U.S. Vision going private transaction, including the loan from Commerce, was conducted and disclosed in accordance with all applicable laws, including the federal securities laws governing disclosure. Commerce Bancorp chairman Vernon W. Hill 2d said in a statement last night: We are aware of no special review by anyone. Any statement to the contrary is a malicious lie. We believe that anonymous sources are engaged in a misinformation and disinformation campaign designed to smear Commerce and waged in part by short sellers to depress and manipulate Commerces stock for their own gains. Earlier this week, Makadon named a competing banker as the possible source of a complaint to the SEC. Though banks lending money to their own executives and directors is a common and accepted practice, federal records show that Commerce is more likely than other banks in this region to do so. Commerce Bancorps subsidiary banks had 22 insider loans of at least $500,000 on their books at the end of 2002, compared with 12 by Wachovia Corp. and its subsidiary banks. PNC Financial Services Group Inc., second to Wachovia in regional deposits, had 3 insider loans of at least $500,000, and Citizens Financial Group Inc., fourth after Commerce, had 9. Under Commerce rules, loans made to its executives or directors must be approved by Commerce Bancorps board, over which Hill presides. Board members receiving the loans abstain from the vote, under Commerce rules. Hill and his wife, Shirley, initially were part of the investment group with the Norcross brothers and Assemblyman Roberts, which began accumulating stock in U.S. Vision in mid-2000. The Hills withdrew from the group on Aug. 4, 2000 - a few days before the group made its first offer to buy U.S. Vision, according to stock-ownership records filed with the SEC. Contact staff writer Wendy Ruderman at 856-779-3926 or wruderman@phillynews. Contact staff writer Angela Couloumbis at 609-989-9016 or acouloumbis@phillynews. Inquirer staff writer Joseph DiStefano contributed to this article.
Posted on: Sat, 27 Sep 2014 04:40:17 +0000
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