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 http://ReformPICONow.com/ have taken to the Internet to advance the shareholder cause.
The bloggers make their desire clear: “The voting results from PICO’s 2016 Annual Meeting indicate that Howard Brownstein received more ‘Not For’ votes than ‘For’ votes. Mr. Brownstein should tender his resignation or the PICO Holdings Corporate Governance and Nominating Committee should require Mr. Brownstein to tender his resignation.”
The bloggers relate, “We were fans of Howie at first. We wrote complementary of Mr. Brownstein between his appointment and June 7, 2016. We noted his sterling academic pedigree, his potential to handle the criminal Hart Compensation Scheme and his positive reputation in the corporate restructuring community.
Our opinion turned 180-degrees after observing Howie’s derelict management of PICOGate, which revealed that John “The Juicer” Hart and lame duck PICO Director Kenneth “The Slug” Slepicka, failed to disclose a material conflict of interest — for 6 years Mr. Brownstein is the Audit Committee Chair of PICO; he is responsible for Related Transactions, i.e. PICOGate.”
The bloggers asked Mr. Brownstein to expeditiously discover the truth and communicate that truth to the owners of the business. However, “Mr. Brownstein fell far short of that ideal. Mr. Brownstein opened PICO’s Board Minutes from 2010 and asked Mr. Hart some questions. We feel this Ace Ventura-style inquiry amounts to a betrayal of shareholder interests. We sense a coverup of PICOGate. We sense cronyism in the PICO Boardroom. We perceive Mr. Brownstein as a Hart lackey. We sense shareholder betrayal in the extreme. We ask the same question we have been asking for almost 2 months: What is wrong with expeditiously seeking the truth and reporting that truth to the owners of the business?”
The bloggers review the voting results. “The formal 2016 voting results for Howie are:
“For” Votes: 11,391,887
“Not For” Votes: 9,998,790
But there is a catch. Under the Central Square Agreement, Mr. Cardwell was required to vote all 1,407,498 of his PICO shares in accordance with the Board’s recommendation. The Board recommended that shareholders vote ‘For’ Mr. Brownstein, which meant that Mr. Cardwell involuntarily voted ‘For’ Mr. Brownstein. As a result, the number of ‘For’ votes for Howie is artificially inflated.
If Mr. Cardwell was permitted to vote as he wished, the vote tally would be:
“For” Votes: 9,984,389
“Not For” Votes: 11,406,288
We have been told that in a meeting with Mr. Brownstein, Mr. Marino and other PICO Board members, Mr. Cardwell was asked the following hypothetical: ‘If you could have voted your shares freely, how would you have voted in relation to Mr. Brownstein?’ We have been told Mr. Cardwell responded, ‘Against.’”
The bloggers cite Mr. Brownstein’s membership in the National Association of Corporate Directors. “According to the NACD document, “Key Agreed Principles — to Strengthen Corporate Governance For U.S. Publicly Traded Companies,” a director in Howie’s predicament must tender their resignation. Section IX, “Shareholder Input in Director Selection,” at Page 13 says that in an uncontested election, a candidate who fails to win a majority of the votes cast should be required to tender his or her resignation.”