Hank, you wrote:
Can anyone think of a reason why a CEO would intentionally
ruin his company or want it to appear to be ruined?
Babish and Campbell have accused Rhodes of giving away nearly $400,000 worth of stocks for a study of Indian herbs that was never done. To make matters worse, he compounded this alleged illegality by lying about it in the 1995 stockholders report. These are serious charges which may end up putting Rhodes in jail. If the charges against Rhodes can be believed (and I believe them), Rhodes' shenanigans go back to before November 1995 when Rhodes "raised" $7 million in a private placement through the issuance of convertable preferred stock which lacked a redemption floor or fixed conversion price. The expenses and closing costs were in excess of $1,250,000 leaving net proceeds for the private placement of $5,732,000. These expenses were over 23% of the net proceeds, far above industry averages. Why did Rhodes do this? Could be have gotten a kickback from the $1.25 million? (This is the financing that caused the stock to fall from $8 to $1 in a few months.) See points 5 and 6 of Campbell's lawyer's letter:
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To make matters worse, he bought back $1.3 million of this stock on the open market to try to cover up this mistake.
Rhodes' bungling must have caused some bad blood between him and Babish/Campbell. This is just speculation, but there is tentative evidence that bad blood may have existed as early as late 1994 when the company issued 375,300 warrants to Dr. Babish but they never registered them with the SEC so he could not trade them. In other words, they promised him warrants, but never delivered. This seems like a gratuitious insult. Why wouldn't they want to keep the founder and the brains behind the science of the company happy? (See point 13 of Babish's defense.)
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This is pure speculation, and I say it ever so tentatively. Combine our knowledge of Rhodes shenanigans and his Ah Immunoassay giveaway. It looks like he is intent on destroying the company. Hank, you raise an interesting theory about his intentionally trying to lower the stock so a third party could sweep it up. I can't rule this possibility out. But there is a simpler explanation. Perhaps Rhodes realizes Babish and Campbell have the goods on him and he thinks that their complaints are going to cause him to go to jail. Could he be trying to destroy the company just to get even with them? Could he be trying to drag them and their good names down just to settle a score. This is a wild theory because he would be losing the opportunity to become very rich. He has a lot of stock and this company could make him a multi multi millionaire if it were doing well. However, he is 69 years old and he could spend the rest of his life in jail, so all the riches in the world might not mean anything to him. His actions might be the financial equivalent of the suicidal Palestinian bombers in Israel.
Again, this is a wild theory and I don't know if I fully believe it. But wild theories tend to flourish in environments bereft of solid information. And Rhodes has no one to blame but himself for creating that environment since he has done everything in his power to keep the stockholders in the dark.
Robin |
