This is the email I just sent to David Baines and Barry Critchley. I must admit, I wasn't sure about Critchley's email, as I wasn't able to find an email address for him. The only thing available is a direct message via the Financial Post, so I will be cut/pasting this same message over to him as well. I have posted some of your messages. I believe this email may get some sort of interest. One can only hope. It's a bit long, but I'm sure it covers off most of the areas of concern.
Dear Mr Baines/Critchley:
I am a stockholder of Allen Vanguard, along with many thousands of others.
We have been basically “p….d” on by David Luxton, and were told as of September 11/09
(What a day to do this…9/11) that the company is being bought privately by Versa Capital,
and although all the employees and management get to keep their jobs and bonuses,
the shareholders get nothing.
This has been an ongoing process of manipulated theft for the past year. The deal with Tailwind
fell through…I guess their shareholders saw a problem and backed out. Around March of this year,
Versa (although the shareholders were never told) went into secret meetings with Allen Vanguard.
The stockholders have been meeting on a bulletin board for some time on Stockhouse.
Guess what happened. Stockhouse shut us down after a complaint from Allen Vanguard.
Our messages were flying on that weekend….and it was suggested by some of the stockholders
that the OSC put a halt to trading on Monday of VRS. The calls were successful and the trading was
stopped. VRS was de-listed pending an investigation. We don’t know where that investigation is
at this present time.
It is believed that Luxton/Allen Vanguard and Versa were hoping that because of the news announcement,
that on Monday everyone would dump their shares at firesale prices of .05 That way the majority of the shares
would be bought by Versa and they’d have the majority vote to do whatever they want with the company.
One of the shareholders took it upon himself to move us all over to the SILCON INVESTOR site. You will find
us there. The heading on the site will show you how many agencies we’ve contacted and the complaints we’ve
lodged. We’ve all signed up to SISKINDS (lawyers) were we are signing a Class Action Suit. SISKINDS is taking
the allegation very seriously and have the VRS class action form on their home page. We’ve called the
RCMP Commercial Crime section in Ottawa and others have called Justice Minister Rob Nicholson (I too will be
calling him to lodge my complaint). The Royal Bank of Canada, who also appears to be involved is receiving
Letters/phonecalls/emails from VRS shareholders lodging their displeasure.
Some of the questions raised by the VRS shareholders are:
1.White Collar crime is not as easy to get away with as it once was. The massive write-downs that VRS CFO has been dwindling asset value, is nothing less than fraud.
Devaluating an assets worth below its actual value, is hiding money. Fraud.
CRA Tax implications of inappropriate write downs ?
Allen-Vanguard's CFO made some aggressive writedowns over the past year. These writedowns Q4 2008 had intangible assets write down, and Q3 2009 had non-anniversary intangible assets write down (without a special trigger) which in effect devalued Allen-Vanguard so its Liabilities exceed its Assets. Allen-Vanguard then announced a sale to a US buyer, Versa.
Could it be possible that these write downs were pre-planned as an incentive for Versa to buy an "undervalued" company ?
(conspiracy to commit tax fraud)
Could the writedown in intangible assets that occurred in Q3 2009 be considered as "inappropriate" by Canada Revenue Agency, and disallowed ?
Could a court ordered forensic review would discover other accounting improprieties ?
Could the Q3 writedown in intangible assets be considered by CRA or criminal investigators as tax evasion ?
If the Q3 intangible asset writedown is disallowed, what tax implications would this have on the sale to Versa ?
IMHO a forensic review could find that Allen-Vanguard has a net worth well over $50 Million (that would deliver almost .50/share to shareholders). The tax to be paid on a sale valued at $50 million is considerable, and should be recovered
VRS SHAREHOLDERS READ THIS INFORMATION BELOW AND ACT AS YOU SEE FIT
cra-arc.gc.ca
Informant Leads Program
The Canada Revenue Agency (CRA) takes abuse of Canada's tax laws very seriously. When an individual or business does not fully comply with tax legislation, an unfair burden is placed on law-abiding taxpayers and businesses and the integrity of Canada's tax base is jeopardized.
The mandate of the Informant Leads Program is to co-ordinate all leads that the CRA receives from informants, to determine if there is an element of non-compliance with tax legislation, and to ensure that appropriate enforcement action is taken.
The program is regionalized into five offices across the country. To report suspected tax evasion, contact the office in your region (you may report the information anonymously):
2. What benefit is in this deal for RBC ?
If anyone thinks that RBC, as lead lender, was ethical, moral and acting with integrity, while making a profit, knowing full well that shareholders would get "screwed", - WAKE UP.
If you don't know about RBC involvement as lead lender with Allen-Vanguard, read the press releases on this website (not sure if they have taken it down yet?) www.allenvanguard.com/Index.aspx
To find that RBC is the lead lender in the syndicate;
www.integratir.com/newsrelease.asp?news=2131021069&ticker=T.VRS<=EN ...secured credit facilities underwritten by RBC Capital Markets ("RBC"), consisting of a three-year $200 million term loan facility ("Term Loan")
RBC touts their integrity, ethics and morals in ALL deals - yet they certainly had no problem participating in this backroom, private, "exclusive", 6 month prolonged deal with a US investor.
Maybe this deal made by some "rogue" RBC employees, was not held to corporate standards (?) - this deal certainly has a lot of questionable activity.
I would think that any bank trying to maintain a high ethical standard would have a problem being party to a deal seeing thousands of individual retail investors getting "screwed" - but apparently RBC doesn't have that concern.
Maybe our market cap is part of their profit ?
Maybe "screwing" shareholders was their idea ?
I would hope that the CEO of the Royal Bank has a good look at what transpired, and force corrective actions. RBC could have made this a non-issue simply by seeing our market cap paid - instead they compromised their integrity - for a cost of less than 11 million dollars !!!
VRS CFO writes-down the value of assets to the value of RBC debt, well excuse me if I beg to differ. How can VRS (valued at 100 million, buy Med-Eng for 650 million, add HMS for 50 million - but now the CFO's "magic pencil" say it is ALL worth just 200 million - and shareholders are to accept this as factual ?
Gee, wouldn't it be nice to have an independant 3rd party review ?
May 7th 2008 RBC had an extensive look at the VRS books and loaned 200 million - it seems RBC thought the assets were worth substantially more ? www.integratir.com/newsrelease.asp?news=2131021069&ticker=T.VRS<=EN
RBC held SECURED financing - they had no reason to take the first and only offer presented. The VRS over-aggressive write down of assets did not affect them, bankruptcy would not affect them, "secured" means they get paid.
Why would they co-conspire to see shareholders get nothing ?
What benefit is in this deal for RBC ?
If you want to think this RBC deal is ethical, moral and acting with integrity - I don't agree.
3. I have no idea if a company can cancel all of their shares simply because their liabilities are greater than assets. I know this has been mentioned a few times on this board and on the old SH board, but I still cannot comprehend how any company under any circumstance can just cancel all the common shares.
However, let's assume a couple of things:
1) if liab. are greater than assets, the shares can be canceled.
2) All assets could be sold, except for goodwill
As of the Q3 statements, total assets were $264M. Subtract $67M of goodwill, you're left with $197M.
Liabilities at Q3 were $315M. That leaves liab. $118M in excess of assets.
Here is where it gets interesting. In the Q3 earnings, there was a write-down of intangible assets (NOT goodwill) of exactly $118M. If that writedown did not occur, then at Q3, assets and liabilities would be about even. Add back some part of the $67M of goodwill that may have some value, and all of the sudden total assets exceeds total liabilities.
It is also interesting that the writedown in intangible assets that occurred in 2008 was in Q4, not Q3 like this year. Impairment tests are supposed to occur at the same time each year, unless there is a 'trigger' event causing them to be revalued.
I don't know what to make of any of this. The whole thing is disturbing, and I am following it closely.
4. Quickly went through the quarterly reports. The picture is indeed stunning and begs for some answers.
Write-dows by quarter:
Q1 Q2 Q3
Goodwill 0 3.95 Mil 11.34 Mil
Intangibles 3.8 Mil 5.87 Mil 122.59 Mil
Revenue 72.710 56.555 46.980
Drop Q over Q 22% 17%
Why would they take such huge write-downs in Q3 even though revenue dropped less in Q3 than it did in Q2? The explanation in the Q3 NR doesn't seem to match up with the lower drop in sales.
From the Aug 17 NR:
"The Company noted that due to reduced revenues from the acquired assets of Med-Eng Systems (now renamed AVTI), management tested for impairment of goodwill and intangibles at June 30, 2009. This testing indicated that the fair value of the AVTI reporting unit was lower than its carrying amount. Management concluded that impairment of goodwill and of certain intangible assets had occurred, and reduced the carrying value of goodwill by $11.3 million, and of certain intangible assets related to the Electronic Systems business by $27.6 million and of certain intangible assets related to the Personal Protective Systems business by $91.4 million."
Another "strange" item ... In previous quarterly report Nr's they always mentioned the order backlog which, per example, stood at $88 Mil at the end of Q2. Why is there no mention of the order backlog in the Q3 NR?????
5. The wording in the press release is suspect.
The question is why were the intangibles tested at Q3, not at say Q2 or Q4? The revenues from the Med-Eng acquisition have never met expectations. Did the decline in revenue become so significant in Q3 that there was a 'trigger' that forced the revaluation? If so, management must have sufficient documentation to backup this claim. Luxton has claimed all along that the problem with the company has been due to the 'timing' of orders. Is he now claiming that there will essentially be no orders? Did it go from lumpy orders to no orders?
Additionally, calculating the fair value of the intangibles requires many estimates regarding expected future revenues from the underlying assets. Management must have documentation (such as communication with customers regarding potential orders, or lack thereof) that the expected FUTURE revenues from Med-Eng are significantly lower than the last time they tested.
Also, remember that in all of this impairment testing, there must have been auditors who OK'd the writedowns.
Also, the only way that there is nothing left for shareholders is if total obligations exceed assets. This was only the case after the writedowns in Q3.
What if AV wins an 'unexpected' order in a couple of months? That would imply that the intangible assets were written down too far, and that there was shareholder value at the time of the Versa transaction. Also, any reference to the 'Made in America' program is bogus because that only applies to stimulus spending. I don't think the $800 billion in stimulus spending included defense.
++++++++++++++++
I am a shareholder that has $34,000. invested in Allen Vanguard. I believe the company is still good.
Unfortunately, David Luxton’s mishandling of the situation is indeed suspect.
Please withhold my name/phone number from print. |
