Investor Colin Post Files Books & Records Request

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 $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 have taken to the Internet to advance the shareholder cause.

A PICO investor has filed a books and records request. “Given the controversy surrounding John Hart’s criminal employment scheme, it was only logical that an industrious and intelligent PICO shareholder would seek the truth. On July 15, 2016, pursuant to California Corporations Code 1601, PICO shareowner Colin Post delivered a Books and Records Request to PICO General Secretary, Max Webb.

A Books and Records Request is a petition by a shareholder to receive and examine relevant documents that are under the control of a corporation’s leadership. Inspection of Books and Records is a statutory right granted to the owners of a business. Its ultimate objective is the clarification of an issue that may threaten the interests’ of shareholders.

A Books and Records Request is usually a precursor to litigation and is integral to the preparation of any shareholder lawsuit against a corporation. State courts encourage inspection requests pre-litigation and will dismiss suits in which such an inquiry has not been completed.

Mr. Post sought ‘Board Materials’ that pertain to both the Hart Employment Agreement and the Bonus Plan, and all materials that relate to the process under which they were conceived.”

The bloggers are surprised that PICO turned the matter over to its activist defense attorney. “Mr. Post’s Request found its way from Mr. Webb to Keith Gottfried, Esq., at Morgan, Lewis & Bockius, LLP, in Washington, DC. Although PICO and Mr. Gottfried denied Mr. Post’s Books and Records Request, we submitted it to three different legal experts, including a California corporate attorney. All concurred that the Books and Records Request was compliant with CCC 1601 because:

— it comes from a shareholder;
— the information requested is relevant to shareholder comprehension of the process that produced
Mr. Hart’s Employment Agreement and the Bonus Plan;
— the request is narrow;
— the relevant documents are not available from another source;
— Mr. Post intends to pursue a course of action to benefit other shareholders; and
— it cited relevant case law and a legal rationale for disclosure of information that PICO has
publicly discussed but has kept secret.

We were shocked at several aspects of PICO’s denial. We found one aspect more shocking than the others: that Mr. Webb (and any other PICO Executive or Director involved in the decision) turned the Books & Records Request over to Mr. Gottfried.

Mr. Gottfried is an attack-dog activist defense attorney. His primary job is to thwart the will of shareholders that agitate for change. We estimate that Mr. Gottfried charges $1,000 per hour.

A books and records request is a routine corporate matter that should be handled by corporate counsel — which in PICO’s case is Jason Kent, Esq., at Cooley LLP. This Books and Records Request relied on a California statute and Mr. Kent is a California attorney — while Mr. Gottfried is in Washington DC.”

The bloggers criticize the decision to retain Mr. Gottfried for this matter. “Raymond Marino and PICO have promised greater transparency and openness; Mr. Gottfried represents the exact opposite. His job, apparently, is to use his view of the law to silence shareholders and squelch efforts at change.

So what in the world was Max Webb (and any other PICO Executive or Director involved in the decision) thinking when they turned the Books & Records Request over to Mr. Gottfried?

We view Mr. Gottfried’s response as unnecessarily hostile. Mr. Post is a shareowner, a partner to all PICO Directors, Executives and shareowners. He entrusted his hard-earned capital to PICO and, like all other shareholders, was dismayed at the criminal Hart Compensation Scheme. In response, Mr. Post is exercising his statutory right. We believe that Mr. Gottfried inappropriately treated him like an annoyance rather than a partner in the business.

Was the PICO Board of Directors made made aware of the Books and Records Request? Did the Board approve assignment of this matter to Mr. Gottfried? Did the Board approve the letter and spirit of this response? Given this Board’s recent rhetoric about improved relations with shareholders — especially those by Mr. Marino — we hope not.

Which begs the question: Did Juicer and Max “Tangled” Webb furtively commandeer this Request without alerting anyone else at PICO?”

The bloggers ask PICO to respect shareholder will. “We believe that PICO should fulfill this Books and Records Request, preferably in an 8-K filing. PICO can avoid copycat books and records requests, which will materialize if stonewalling persists. PICO Executives and Directors can obviate the distraction which will ensue if this process drags out. Shareholders may take legal action to procure the Books and Records Request information, which would be prolonged and expensive. Resistance may contribute to the rationale for a Special Meeting.

On the latest earnings call Mr. Marino said, ‘I can assure you that the seven of us are all deeply committed to delivering strong corporate governance for PICO.’

Great. Then when a Director vote is taken on disclosure of this information, we assume it will be unanimous.”