Banc of California to review alleged ties to fraudster after investor’s demand

Banc of California, a fast-growing Irvine lender that’s been rocked by allegations that it is connected to a convicted con artist, has started an investigation into those claims for the second time.

This time the bank has hired an outside firm, a move likely aimed at appeasing a major shareholder who argued a previous investigation into allegations of connections between Banc of California insiders and fraudster Jason Galanis was handled by a law firm that was too cozy with the bank and its executives.

Richard Lashley, principal of PL Capital, the bank’s second-largest shareholder, complained in a letter that law firm Winston & Strawn was “not sufficiently independent” because it had represented the bank and its chief executive, Steven Sugarman, in other matters.

In a regulatory filing last week, the bank said it had started a review of “purported improper relationships” — it did not name Galanis — and that the investigation would be handled by “independent legal counsel having no prior relationship with the company or its officers.”

The bank did not name the firm handling the new investigation.

Because of that review, the bank also delayed filing its most recent quarterly report with the Securities and Exchange Commission, according to the filing. In a letter sent Monday to the bank, Lashley said he supports the new investigation.

Through a spokeswoman, bank executives declined to comment beyond the public filings.

Banc of California has been dogged over the last two months by allegations of connections to Galanis, including what Lashley described as “a significant amount of interconnectedness” between Galanis — who this summer pleaded guilty to securities fraud charges — and bank insiders or their family members, including Jason Sugarman, an advisor to the bank and the brother of its chief executive, Steven Sugarman.

Some of those connections were raised in a Sept. 7 Bloomberg story following the bank’s announcement that it would pay a reported $100 million for the naming rights to the soccer stadium being built by new Major League Soccer team L.A. Football Club — a team owned, in part, by Jason Sugarman.

Banc of California’s stock started sliding after that story, then cratered when an anonymous short-seller — an investor who has bet against the bank — wrote a post on a financial blog alleging connections and outlining them in detail, concluding that Galanis had gained control of the bank. Lashley said he does not agree with that conclusion, and the bank has denied the short-seller’s claim.

Like other bank stocks, Banc of California’s share price has climbed since election day, though the bank’s shares are still down more than 34% since the first Bloomberg report.

Shares closed unchanged at $14.80 on Wednesday.

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