BCB Bancorp, Inc.
September 9, 2022
Page 2
In June, 2018 Board member Gary Stetz who had been serving as the Chairperson of the Audit Committee, resigned from the Board. Chairman Hogan, after initially fulfilling the role, named John Pulomena to serve as the new Chairperson of the Committee in April 2019. Mr. Pulomena was appointed to the Board at Mr. Hogan’s behest. At that time, Dr. Pellegrini had also presented a candidate for Board consideration who was a Certified Public Accountant with auditing experience, who could have served as the Auditing Committee Chair. This qualified candidate was not approved by the Board. The newly appointed Committee Chairperson, Mr. Pulomena, was not a Certified Auditor nor a Certified Public Accountant, and is not believed to have prior bank auditing experience.
Since John Pulomena’s appointment as Chair in or about April, 2019, Dr. Pellegrini has observed numerous irregularities in the manner in which the Board carried out its Audit oversight. For example, the Audit Committee had the Chief Compliance Officer, Sandra Sievewright, give Audit reports to the full Board on multiple occasions, instead of having John Pulomena provide his independent assessment to the Board after receiving the reports from management, the Bank’s internal auditors and external auditors. The established practice under Chairperson Stetz’ leadership has always been that the Audit Chair would provide the report to the Board. Dr. Pellegrini also observed that Mr. Pulomena at times seemed unprepared for Committee meetings and full Board meetings, as it appeared he had not reviewed the meeting packets before the meetings and had virtually no questions for the auditors during the Committee meetings. At the full Board meetings, when it was time for the Audit Committee’s independent report, Mr. Pulomena relied on Ms. Sievewright to provide all the details of the compliance and audit activities, and had little to add. Mr. Pulomena would also regularly utilize Zoom for Audit meetings long after the rest of the Committee and the Bank’s auditors were meeting in person. Dr. Pellegrini discussed his concerns regarding Mr. Pulomena’s leadership with various Board members and noted their mutual frustration.
Dr. Pellegrini voiced his objections to these irregularities to Chairman Hogan multiple times, but met hostility. Initially, around May 2021, Dr. Pellegrini requested at a full Board meeting that Mr. Pulomena give the Audit reports, and not pass this function off to Ms. Sievewright. Dr. Pellegrini also expressed this concern directly to Mr. Hogan via a private phone conversation around June 2021. The Chairman was not receptive to these legitimate concerns, likely due to his close relationship with Mr. Pulomena. Additionally, to be certain this was a legitimate concern, Dr. Pellegrini discussed the issue privately with Ms. Sievewright in around June 2021, who strongly agreed with Dr. Pellegrini that management giving the Audit reports was not the independent oversight the regulators required, and that it would eventually raise red flags with them.
The concerns raised by Dr. Pellegrini were based on his years of experience on the Audit Committee and in the banking industry, and went to the core integrity of the Banks’ financial reporting and audit functions. Unfortunately, instead of acting on these legitimate and serious concerns, Chairman Hogan decided to set on a course to silence Dr. Pellegrini that resulted in Dr. Pellegrini’s removal from the Board in July 2022. Mr. Hogan remained hostile to Dr. Pellegrini’s concerns, and repeatly told Dr. Pellegrini that he will no longer receive support from Mr. Hogan, that he was “on his own now” and that there was an activist investor who was targeting Dr. Pellegrini’s Board seat.
