LoanDepot's Hsieh exits day-to-day role due to proxy fight

As a result of a proxy battle with his own board of directors, Anthony Hsieh stepped down as executive chairman of loanDepot by mutual consent, the company announced.

Hsieh, who was replaced by former CoreLogic executive Frank Martell as president and CEO in April 2022 and moved up to his now-former post at that time, will no longer have a day-to-day role at the company. He remains as loanDepot's board chairman.

Mark Brown/Photographer: Mark Brown/Getty I

On Tuesday afternoon, just after the stock market closed, Hsieh released a letter he sent to loanDepot's board declaring as the company's majority shareholder, at the next annual meeting he was nominating — and given his 57% voting power, installing — Steven Ozonian, the CEO of title insurance underwriter Williston Financial Group, to replace former Department of Housing and Urban Development deputy secretary Pamela Patenaude.

However, Hsieh later pushed back on the company's comments, stating in a special meeting on Monday, the board voted 5-2 to remove him as executive chairman. He claimed he was not sent an agenda for this session.

"Mr. Hsieh thereafter agreed that the company could describe the termination as mutual in light of his desire not to serve in this role after the board's vote," a statement he issued late Wednesday afternoon declared. "Also at this special meeting, the Board acted to create a committee that excluded Mr. Hsieh and his director designee — in order to contest Steve Ozonian's nomination — even though the nomination had not been formally submitted by Mr. Hsieh or fully considered by the nominating and corporate governance committee."

Investors reacted negatively to the news, with its stock down approximately 7.7% when the market closed on Wednesday, to $2.41 per share from Tuesday's $2.61. That is well off of the initial public offering price of $14 per share in February 2021.

This unilateral action came about because the loanDepot board was not receptive to his efforts to change its composition, Hsieh said.

"As leaders of this company and stewards of stockholder capital, the board must always challenge itself to be a dynamic center of passionate, informed and relevant perspectives to help guide the company to future success," Hsieh said in his press release. "The recent rise in rates and challenging macroeconomic environment make Mr. Ozonian's potential appointment all the more urgent." 

Only two board positions are up for election at the next meeting. Hsieh's letter to the board stated that his original proposal was to name Ozonian to replace a member who would end their term early. But none agreed.

As for the two available positions, one belongs to Patenaude and the other to Andrew Dodson, the representative of Parthenon Capital, which has been an investor in loanDepot since 2009. Shareholder agreements require Hsieh to support Dodson's re-election. That left Patenaude's seat as the only one available, even though Hsieh claimed he wasn't targeting her personally.

A statement from the company declared Hsieh was jumping the gun in this matter. The board's nominating and corporate governance committee has interviewed Ozonian as part of its ongoing process for evaluating potential nominees but prior to the completion of the process, Hsieh made his intentions known.

"It is surprising and disappointing that Mr. Hsieh would attempt to circumvent the company's process for assessing potential director nominees," Dawn Lepore, chair of the nominating and governance committee said in the loanDepot press release. "We question why he would pursue a disruptive proxy contest to install his nominee when Mr. Ozonian has already been, and continues to be, under evaluation."

Hsieh's Wednesday afternoon release reiterated that the board was not seriously considering Ozonian as a candidate and it was looking to run out the clock on his nomination.

"Mr. Hsieh was told there would be no decision on Mr. Ozonian's candidacy until sometime in late February," the latest statement said. "The nomination deadline for stockholders to exercise their rights to nominate a director, according to the company's bylaws, is Feb. 17." That would be too late for Hsieh to make his own nomination, which is why he acted now.

The board's statement then listed Patenaude's resume, including her recent appointment as chair of the Home Builders Institute board of trustees. She took her position at loanDepot in July 2021.

But in his follow up statement, Hsieh considered the disclosure of Patenaude's bio to be an unusual course of action and its inclusion means that the board is not giving Ozonian a fair shake.

"There is no dispute that Ms. Patenaude is an accomplished individual, but the company's obvious attempts to publicize those accomplishments at this time speaks volumes," Hsieh said.

LoanDepot declined to make any further comment regarding the situation when asked on Wednesday morning.

Ozonian is currently on LendingTree's board and is the former CEO of its real estate brokerage business. Among his other past positions were being the national homeownership executive of Bank of America and CEO of Realtor.com.

This is just the latest turmoil at the company, which included a loss of $137.5 million in the third quarter.

In July it announced plans to fire an additional 2,000 employees by the end of 2022, for 4,800 job reductions for the full year. But after its second quarter results announcement that included the decision to exit wholesale lending, loanDepot executives admitted the cuts were likely to go deeper.

On the legal front, Hsieh was personally named in a lawsuit filed by former chief operating officer Tamara "Tammy" Richards that alleged she was wrongfully terminated over her refusal to participate in a scheme to reduce underwriting standards as the company looked to build volume prior to its initial public offering. Richards also claimed loanDepot and Hsieh operated a frat house environment.

The company is also the target of a shareholder lawsuit regarding claims it made about its business during the IPO process.

And a Black couple from Maryland, Nathan Connolly and Shani Mott sued loanDepot and an appraiser over allegations of racial discrimination when they sought a refinance.

LoanDepot is also a plaintiff against CrossCountry Mortgage over allegations of loan officer poaching.