FT Covers RPN’s Struggle For Value Creation

As originally appeaered 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 $662 million in assets and $426 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/ (RPN) have taken to the Internet to advance the shareholder cause.

The bloggers note they have made the big time. “On November 7, 2016, ‘Agenda’ a service of the Financial Times, published an article on the struggle for value creation at PICO Holdings. FT Reporter Tony Chapelle gets the PICO situation exactly right when he writes ‘Boards should take note of this case to understand how separate shareholders can form loose alliances and force radical changes in governance.’

According to the bloggers, “Mr. Chapelle’s article is an excellent portrayal of the shareholder-led effort for value creation at PICO. Mr. Chapelle interviewed RPN, Andrew Shapiro of Lawndale Capital, former PICO Director Carlos Campbell and Tom Pollock, Esq., corporate finance attorney at Paul Hastings. We encourage all readers to sign up for a free 3-week trial subscription to Agenda and read Mr. Chapelle’s article.”

The bloggers are surprised by revelations made by Carlos Campbell. “Mr. Chapelle reveals that Carlos ‘The NACD-Decorated Horse Thief’ Campbell states that he did not retire from the PICO Board, that the official PICO press release is untrue. Instead, Mr. Campbell claims that he was pushed off the Board by his fellow Directors, he was made a ‘sacrificial lamb.’

“We have three things to say. First, we applaud all our Directors who participated in the quiet removal of Mr. Campbell from the PICO Board. He was a deplorable Director and, as his incoherent and unprofessional tirade at the Annual Meeting proved, he was unfit to serve on the Board of a publicly held corporation.

“Second, we laugh at Mr. Campbell’s self-serving characterization — that he was removed as a sacrificial lamb. If only the truth were so benign. Mr. Campbell was universally despised by PICO shareholders. If Mr. Campbell had stood for reelection in 2016, he would have been thrown from the Board faster than he could utter “performance” (if you need this PICO joke explained, contact RPN). Mr. Campbell was not made a “sacrificial lamb” but another animal analogy is apt; his tenure on the PICO Board was effectively euthanized — it was humanely terminated.

“Third, we question the sanity of a man who besmirches himself so gravely in public. Mr. Campbell had made a quiet exit from PICO. As best we knew, everyone thought he retired. Now, Mr. Campbell comes forward publicly revealing that he was removed under humiliating circumstances. No wonder he was Juicer’s appointee. If he was any less perceptive, you would have to water him twice per week.

“Not only does Mr. Campbell attempt to sully the current PICO Directors. He also takes a few cheap shots at former Chairwoman Kristina Leslie. In just a single interview, Mr. Campbell manages to disparage just about all his PICO peers, both past and present. Boy Carlos, you are going to be a popular guy at the next NACD Convention!”

The bloggers call on the PICO Board to remove Director Michael Machado in the same manner. “We ask the PICO Board — specifically the CGNC — to similarly euthanize the Directorship of Michael ‘Desperado’ Machado before the 2017 Annual Meeting.

“As CGNC Chair, Desperado is directly responsible for the soft declassification implemented after the 2015 Annual Meeting. Desperado was one of two Legacy Comp Committee members when the criminal Hart Compensation Scheme was promulgated. Desperado shamelessly signed his name to the criminal Hart Compensation Scheme in the 2016 Proxy Statement. Wwe would appreciate it if the CGNC members would save us, and all shareholders, the trouble. Euthanasia of Desperado’s Directorship is good corporate governance. It will save resources while implementing a conclusion that is already foregone.”

The bloggers continue to express displeasure with the current PICO Board. “This Board of Directors has not maximized shareholder value. Hapless Howie Brownstein refused to initiate an independent investigation when we broke PICOGate. Raymond ‘Delaymond’ Marino refused to seek evidence to fire John ‘The Juicer’ Hart for cause, an omission which unnecessarily cost PICO owners $11 million. We screamed at these men over and over again to do the right thing. They refused.

“We believe the PICO Board needs one or two more shareholder oriented Directors. As currently configured, this Board is not maximizing shareholder value. The greatest corroboration for our opinion is in this Board’s performance, which is wanting.

Mr. Chapelle’s article is impressive for its accuracy. He gets a lot of things right, but one stands out: RPN is not finished. Far from it.