Bank feud: Chairman Giles quits VNB with other directors

A feud over corporate governance compounded an already painful December for a major Central Virginia financial institution. Virginia National Bank has experienced a leadership shake-up that has seen nearly one third of the board of trustees quit including the chairman, Mark Giles.

"My resignation is effective immediately," Giles tells President Glenn Rust in a December 19 letter that followed an apparently contentious meeting earlier that day. Neither Rust nor Giles, who spent nearly a decade as the Bank's first president and who chaired the board since 2005, returned repeated telephone messages.

Two other board members, Ms. Claire Gargalli and Mr. Leslie Disharoon, also quit that same Monday in what the bank concedes was a disagreement over the composition of its board of directors. A fourth director on the 13-person board, Neal Kassell, resigned two days later for unstated reasons.

In recent days, the usual discussions of loans and strategic growth at the home-grown but publicly-held  financial institution (VABK.OB) may have been compounded by the financial struggles of two board members and the death of the bank's longtime chief financial officer.

On December 3, Steve Perry, the 52-year-old CFO and chief operations officer since the bank's 1998 founding, lost a battle with cancer.

Meanwhile, Virginia National may be dealing with unpleasant questions about the financial dealings of its vice-chairman, Hunter Craig. As regular Hook readers know, Craig, having already extracted $11.7 million in secret state tax credits, recently commenced litigation attempting to extract another $19.5 million in the controversial credits to bail out a failed real estate speculation called Biscuit Run.

The key owners of the company that owned Biscuit Run prior to the property's December 2009 sale to the state as a park were Craig and his father-in-law and fellow VNB board member Wick McNeely. The two appear to owe another bank millions for the still-outstanding loan on the nearly 1,200-acre tract. In last year's proxy statement, the bank revealed that Craig and McNeely have pledged nearly all of their approximately $3 million each in VNB stock to an unnamed entity.

A phone message left with Craig was not returned, and phone conversations with departed board members Gargalli and Disharoon produced no information. However, according to a Form 8-K, a government-mandated disclosure of important events to company shareholders, the three board members who quit VNB Monday did so after disagreeing with other board members.

Giles submitted a typed resignation letter, while fellow board members Gargalli and Disharoon submitted short, hand-written resignations. Kassell's resignation was unrelated to the board disagreement, according to the federal document.

Board member William D. Dittmar Jr. has been tapped as the new chair.

Virginia National's stock was sold to the public in 1998 for $10 per share. After practically doubling within a year, the stock eventually retreated and then plateaued. It remained steady during the week of the shake-up at $16.90. However, after this story appeared online, the stock fell over 20 percent and settled at presstime on Tuesday, January 3, to about $14 per share.

A reporter's conversations with several analysts suggests that VNB presents an attractive take-over target at a level over $20 per share due to its high cost structure– the CEO alone takes in over $350,000 a year– and a strong loan portfolio. However, the analysts also noted that having two board members pledging away their stock and waging litigation against Virginia taxpayers harms the bank's reputation.

Another bank founded around the same time, Albemarle First, was eventually sold. Whether VNB has likewise pursued an acquisition has not been revealed, but its official public report indicates that the disagreement concerned the "composition" of the board of directors, a tantalizing hint that unease over allowing Craig to remain on the board could be a focus of the disagreement.

"I have seen things like this happen before when people disagree over selling a company," says one Charlottesville-based investment advisor. "It could also be related to the woes of one of their founders and big shareholders."

–updated 11:40am January 3 for print publication

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Mr. Craig clearly got in over his head and looks like some are bailing out.

Resignation over a feud? I don't think so. They may be trying to distance themselves from the activities of the bank.

Let's hope that customer's accounts have not been utilized to pay for Biscuit Run loans like MF Global is trying to explain. Kassell is a UVA neurosurgeon and probably was on the board for the prestige and salary. Wonder how much board members were being paid?

Always fun to see the good ole boys get into it.

I might just be me, but what is the purpose of putting a picture of legendary astronaut John Glenn in this story?
R.I.P.: John Africa

Where there is smoke there is fire. Something fishy here. The bigger they are the harder they fall.

In reporting, I can't help but notice that when the subjects(s) of a story do not return calls to the reporter, it is referred to as "did not IMMEDIATELY return calls". If they didn't call you back, what does immediate have to do with it? Either they returned your call or they didn't. Wasn't sure if that was something taught from the book of journalism....

"Immediately" is an important distinction, because it indicates that the subject was given very little time to respond, and their lack of a response consequently doesn't necessarily indicate anything. It's not particularly fair to a reporter to give somebody (for instance) thirty seconds to return a phone call before running a story saying that they didn't hear back from the subject, because the implied reluctance to talk can, in turn, imply guilt or culpability. Hence "immediately." If a reporter gives a subject a day, a week, or even a month to respond, then the word "immediately" can be excised, because a reasonable time was provided for a response to come.

Thanks Waldo. I always wondered why they did that. Merry Christmas

In this case, I wouldn't hold my breath waiting for a response.

Liberalace, the photo is not of astronaut John Glenn. Was your comment intended as a joke about someone who is out in space?

Ah, good ol' Hook censorship. Always ommiting crucial details and resculpting reality to suit your notion of the story.

Hook Reader, please state your case of censorship, omitting details. What's your notion of the real story?

More rats jumping another sinking ship.

Looks like the Charlottesville 1% bubble has sprung a leak.

Watching 1%ers disagree in public is good sport!

Hey Hawes, how about a FOIA request to the Comptroller of the Currency about insider transactions at VNB, findings from the COC's review of VNB Board minutes and Loan Committee minutes, examination exceptions, etc? There should also be a readily available "List of Insider Loans." Are the terms of those loans being met? How do the interest rates on insider loans compare to loans of other borrowers?

Rumour has it that McNeely himself is struggling financially, with many assets sold or for sale at "after Christmas" prices!

Mark Giles was recruited from a $3 billion bank in Texas to start up VNB from scratch. Mark is responsible for the success it has had. A lot of Mark's pay was future expectations, that is stock and stock options. Because he believed in the bank. The stock started at ten (I bought a chunk) ascended as high as $36 at one point, now it is back down to $13. A sad situation for him, as for any major stockholder. Which I no longer am. I sold a profit and have no complaints.

Mark Giles is good at what he does. Very good. This writer recalls talking to him four years ago when Mark cautioned about what he saw as a mortgage bubble, and its impending collapse. Exactly what happend about a year after that conversation. Without him VNB is rudderless, or better put anchorless, now that a former travel agent and real estate developer with no little or banking acumen is taking over as chairman. I'd already sold my VNB stock in its heyday, now with deep regret I am reducing my accounts there to the FDIC insured limits. Just in case. Because I think MArk wil be missed and his absence keenly felt.

This apart from any eye-brow raising situations involving other remaining directors. I doubt bank regulators would allow any serious shenanigans like that, at least not serious enough to affect the bank. But Mark's departure? The patient is still alive, still has a pulse--but no brainwaves. Won't last long in this condition.

Too bad Hook Reader hasn't been able to present his case against the above story. Where are you HR? Doing some original reporting on your own?

Are checking accounts covered by the FDIC ?

Look around Charlottesville!!! VNB has done, and will cointinue to do, many very nice things for the community it serves. Be very cautious about any assumptions that might be made!!!!! The loss of Mr. Giles is significant but there remains some great leadership there. Thank You VNB for all that you do to support this commmunity!!!!! It is our community bank.

@ Did

"Liberalace, the photo is not of astronaut John Glenn. Was your comment intended as a joke about someone who is out in space?"

Of course it was intended as a joke. I actually laughed out loud when I read it.

And no, it wasn't to indicate someone who is out in space. It was in reference to how he looks. He looks kind of like John Glenn. It's a dumb joke, sure, but it was the way liberalace wrote it that made it funny: "but what is the purpose of putting a picture of legendary astronaut John Glenn in this story?" I don't know, but it made me laugh out loud.

Of course, what would make this whole thing even better would be if liberalace actually *wasn't* kidding and was just unintentionally funny, truly thinking that was a picture of legendary astronaut John Glenn, and feeling sincerely confused about how this mix up could have possibly happened. :D

This does not surprise me. Four members on the Charlottesville board were involved with Biscuit Run. One of the first rules in business is to use someone else's money to start your business or to advance your business. Owning a bank was the perfect way to finance their own endeavors.

@boo0! Happy Halloween. You're spot on, guv. Whilst some might not divine the nuances of my writing, I do not think Giles is lost in space; however, Giles Smith, sports columnist for The Independent, did write a book called "Lost in Music" about his pursuit of music fame as part of a duo with wonderful East Anglian poet Martin Newell. I actually believe Mark Giles to be astute.
Sadly, I cannot claim to have seriously thought Mr. Spencer posted a photo of John Glenn, as I did not attend my upper level classes in the Greene County School District.
R.I.P.: Stafford Repp

Should I sell my VNB stock?

My there seems to be a whole lot of smoke there at VNB!

I have always thought well of Giles but Gardarlli is a retired corporate and international banking executive
This looks very, very bad for VNB

Hey That's My Bank!

If the "pledged stock" has to be sold and is put on the market at one time...could be trouble for the price of shares

@ Nancy....yes,

The bank itself is not in trouble. The leadership is just a huge mess.

Yes. Sell. Sell.

Maybe it's a take-over target, hence potential higher price.

if it smells in the beginning, it will stink in the end.

Does anyone find it odd that no one - zero - effort has been made by the remaining VNB officials to calm fears that this bank is headed for insolvency. More cause for concern.

calm what fears? depositors are covered, its the people who own the stock who should know, the 1%..

November 9, 2010
On November 9, 2010, the FDIC issued a Final Rule implementing section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that provides for unlimited insurance coverage of noninterest-bearing transaction accounts. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. The unlimited insurance coverage is available to all depositors, including consumers, businesses, and government entities. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other deposit accounts held at an FDIC-insured institution.

A noninterest-bearing transaction account is a deposit account where interest is neither accrued nor paid; depositors are permitted to make an unlimited number of transfers and withdrawals; and the bank does not reserve the right to require advance notice of an intended withdrawal.

Though the leadership of VNB has shifted, I don't believe this is the smoke coming from a sinking ship. The directors did not bail out of their responsibilities to the bank due to anything more than a dispute over the composition of the board. Resigning must have been the most logical choice for those that left because they seemed to be pretty clear headed people. I think that those of us who are even remotely familiar with the bank should be able to recognize its ability to overcome fluctuating circumstances. We have no reason to believe that VNB will fail do to a change in leadership. I myself consider this a transition period. All we can do is see what becomes of it.

The Observer

2012 and still tied to a instutution

Open your mind, or be detained in an institution, the irony. I see the Raven Evermore!

The fact that all this coincides with the death of the long time CFO leads one to believe that there are financial difficulties for the bank. Moreso than most banks, this one seemed to have a lot of principals with
their fingers in many pies - complex, complicated and large transactions. When did they have time to do their job? They weren't minding the store, but rather were busy wheeling and dealing in their own enriching activities.

As has been observed, the bank has "leadership issues". Before the CFO Steve Perry passed away, VNB lost their experienced senior loan officer to retirement and their very respected Trust Department President to another bank. Now, they have lost founder Giles and Gardelli, who were voices of reason, although their counsel was not always followed. Add to this the taint of the Biscuit Run scam, the McNeely-Craig house of cards tumbling down, a large number of the bank's stock pledged as collateral to another un-named bank for McNeely's and Craig's shakey loans, rumors that the regulators are crawling all over their loan portfolio, and another senior officer's too public, embarassing social indiscretions... VNB is in disarray. Sell your shares. Move your deposits and loans. Or wake up one morning and wish you had.


Which version do you like better? ;-]

I find it very interesting that the Hook does not enforce it's own policy quoted below. This post list is full of "unverified and/or potentially libellous allegations" yet the editor does nothing to remove them. VNB does a lot for the Charlottesville Community and it is sad to see so many individuals ready to bury them. As far as the strength of the Bank goes people might want to rely on facts rather then rumors. gives the Bank a 4 out of possible 5 stars for soundness.

* Language stronger than "darn," insults, ethnically or racially disparaging language, and comparisons to Hitler usually result in speedy comment deletion and may get you blocked from further commenting. Ditto for posting unverified and/or potentially libelous allegations, and even off-topic digression.

What are the unverified and libelous statements you are referring to ?