Bloggers Declare Independence From Brownstein

As originally appeared in The Troubled Company Reporter.

PICO Holdings, Inc. (Nasdaq:PICO), based in La Jolla, Calif., is a diversified holding company reporting recurring losses since 2008. PICO owns 57% of UCP, Inc. (NYSE:UCP), 100% of Vidler Water Company, Inc., a securities portfolio and various interests in small businesses. PICO has $664 million in assets and $434 million in shareholder equity. Central Square Management LLC and River Road Asset Management LLC collectively own more than 14% of PICO. Other activists at have taken to the Internet to advance the shareholder cause.

The bloggers note that PICO director, Howard Brownstein, is also a member of the board of directors of P&F Industries, Inc. (PFIN), another company with significant corporate governance problems. These governance shortcomings have persisted for several years, despite shareholder requests for improvements. Mr. Brownstein has been a Director of P&F Industries since 2010. He sits on the Audit Committee and is the Chair of both the Corporate Governance and Nominating Committee and the Strategic Planning and Risk Assessment Committee. Howie is a busy beaver in the P&F Industries Boardroom.

Andrew Shapiro Decries Poor Governance

Lawndale Capital Management, LLC, of Mill Valley, California, managed by Andrew E. Shapiro, owns just over 13% of P&F Industries, about 467,426 shares. Mr. Shapiro filed a 13D with the Securities and Exchange Commission on May 18, 2016, lamenting several aspects of corporate governance. Here’s an excerpt:

“As disclosed in prior filings, Lawndale has been in contact with P&F Industries’ management and members of P&F’s Board of Directors regarding concerns relating to the Company’s executive compensation policies and the Board’s composition and corporate governance practices. Over several years, Lawndale has requested implementation of constructive changes that would further improve corporate governance, better align management and directors with shareowners’ interests, and other capital allocation steps to maximize value for all PFIN shareowners.

“Lawndale continues to believe that P&F’s Board should make by-law changes to adopt ‘Best Practices’ in corporate governance such as de-staggering director terms to a single year vs. the Company’s present three-year terms, adopting a majority vote requirement for director election, and enhancing shareholders’ right to call a Special Meeting or remove a director, among others. Lawndale believes P&F’s present archaic barriers to board accountability hurt PFIN’s market valuation and also undesirably insulate its directors from making further necessary improvements in P&F’s compensation practices.”

Timothy Stabosz Goes Ballistic On Howie’s Board

In an email to the P&F Board, made public through a 13D filing with the SEC on January 10, 2012, P&F equity owner Timothy Stabosz, lets it fly:

“The board needs to get past this manifest desire to hide, to dissemble, to obfuscate . . . to evade, to duck, to bob, and weave. I’ve witnessed all of that, breathtakingly, in the last 2+ years . . . in person, and in writing. It’s unseemly, it’s incriminating, and its odious . . . especially considering our company’s history as a “poster child” for poor corporate governance, and licentious executive compensation. Sunlight is the most effective disinfectant. It’s time to open the shutters, as a matter of transparency, and self-respect.

“I greatly resent the fact that your failure, and the broader board’s failure to act, in a more compelling way, to establish your bonafides as fiduciaries, has made me feel helpless, and necessitated my bringing these issues back into the public sphere . . . most uncomfortable and distasteful for me . . . considering I own 8.1% of our company, and want to see it thrive and prosper, without embarrassment, or public “fights.” I TOLD you as such, in private, but instead of meeting me half way, you (in this case, the entire board) continue to alternate between “circling the wagons,” and taking baby steps. It is, quite frankly, infernally frustrating.

“It’s clear that there’s more work to be done at P&F, to clean up its governance, and its reputation. Please DO it . . . or step aside. Those of us who actually have material ownership positions in the company are intensely interested in having value created for us. (It’s OUR company.) The foundation of that is a governance structure that “reeks” of integrity, and transparency. Please remember, going forward, who you work for. (Hint: It’s NOT Richard Horowitz.)” [Capitalization in original].

Shareholder, Heal Thyself

The bloggers make fun of Mr. Brownstein. “Given this publicly available information, we are not sure why PICO appointed Mr. Brownstein a Director. Perhaps Howie was pounding the pavement, looking for Director seats. Or perhaps Keith Gottfried noticed Howie’s practice of sloth in the face of poor corporate governance and suggested a kindred soul to The Juicer. Regardless of origin, we believe that Howie’s inadequate handling of PICOGate is representative of his practice of putting other Directors first and shareholders way down the line.

In his informative and entertaining book, “Dear Chairman,” — — author Jeff Gramm writes that shareholders bear some of the blame for bad corporate governance at their investees. Bad corporate governance starts with an ill-advised change in strategy, a bad proxy proposal, an unjustified increase in salary, etc . . . At firms with manifest poor Boardroom behavior, shareholders have ignored earlier warning signs and have not taken appropriate remedial action in the past.

PICO shareowners are watching Mr. Gramm’s admonition play out in slow motion — and we are at a crossroads. Warning signs have already surfaced with Mr. Brownstein — plenty of ‘em. We believe that Howie’s abandonment of shareholders at P&F Industries and his betrayal of PICO shareholders in relation to PICOGate, portends bad things to come — for the next 3 years!”