High finance is a small world, just as Baltimore is a small town, and it showed as potential conflicts of interest cropped up during a fight over ownership of the city's biggest local bank.
Two groups bid for 1st Mariner Bank in an April 10 auction, held because its parent company is in bankruptcy protection. The parent, First Mariner Bancorp, initially named Pennsylvania-based National Penn Bank the winner, saying its advisers and creditors considered that bidder more likely to get quick regulatory approval.
But a group made up of local investors and out-of-state investment firms had actually bid more, under the complex rules of the auction. And after upping the offer by an extra $4 million and striking a last-minute deal with creditors, that group — organized under the name RKJS Bank — won on Tuesday.
The day before, RKJS attorneys were fighting to come back from behind and show that the auction should be reopened. They said in court that Sandler O'Neill, a First Mariner financial adviser, did not disclose that it had handled a stock repurchase deal for National Penn in January.
William Boyan III, a managing director in Sandler O'Neill's investment banking group and one of the people managing the auction, said during cross-examination that he was not personally involved in that January deal. He didn't see a conflict. "We represent people from time to time in various transactions," he said.
Asked by an RKJS attorney if the company disclosed the connection when National Penn surfaced as a bidder in March, Boyan said: "I don't recall that the subject came up."
Meanwhile, Kilpatrick Townsend & Stockton, a law firm advising First Mariner in the sale of the bank, disclosed Monday that one of its partners, Sean Kehoe, had just resigned to take a job with National Penn.
Firms are required to disclose potential conflicts of interest during bankruptcy proceedings, but Kilpatrick Townsend presented it as a non-issue, saying Kehoe "did not and has not provided any professional services whatsoever" for First Mariner in the case. He began working in National Penn's legal department four days after First Mariner named that bank the winning bidder.
Kilpatrick Townsend did not respond to a request for comment.
On the flip side: David E. Rice, the bankruptcy judge who handled the case, was a partner until 2011 at Venable — the law firm that represented the ultimately successful RKJS in the proceedings.
By the time Rice ruled to reopen the auction, RKJS had already won over the creditors and First Mariner. And his work history didn't come up in court proceedings during the week. But still — Smalltimore.
Rice declined to comment through a law clerk.