Investors oust YBM board
Wednesday, September 23, 1998
Judge delays hearing while compromise is hammered out in courthouse corridor
By SANDRA RUBIN
The Financial Post
Institutional investors seized control of troubled YBM Magnex International Inc. yesterday, installing a new board of directors and promising to do whatever it takes to get $635 million in stock trading again.
The new directors said they will conduct a "thorough, independent" investigation into allegations of criminal activity and make any wrongdoing public.
The magnet manufacturer hasn't traded since the FBI raided its Philadelphia-area headquarters May 13 as part of an organized crime probe supervised by the U.S. Attorney's Office.
But finding auditors and mending fences with Canadian and U.S. securities regulators is YBM's top priority right now, said shareholders' adviser Wesley Voorheis, who guided the institutional revolt.
"The company will get new securities counsel, and we'll start the process of understanding and dealing with the issues," he said soon after a Calgary court approved an order installing the new board.
"We'll certainly be trying to get the cease trading order lifted. I expect that to be a fairly lengthy process, but we'll do it as fast as we can."
Voorheis is on the new five-member board along with partner Stephen Coxford and Gordon MacDougall, a director of Connor Clark & Lunn Investment Management Ltd., which owns about 14% of shares.
The only carryovers from the old regime are chief executive Jacob Bogatin and Owen Mitchell, a vice-president of First Marathon Securities Inc.
First Marathon played a big role in guiding YBM's meteoric rise on the Toronto Stock Exchange. The company was a member of the TSE 300 index and had a market capitalization of almost $1 billion six months ago before being rocked by allegations of links to Russian mobsters.
Auditors Deloitte & Touche LLP walked out in June after expressing concern about possible illegal activities in the troubled Eastern European operations. This was despite a report by an independent committee of YBM directors which said it found no criminal activity.
Voorheis said the new board, which will meet for the first time today, is disbanding the independent committee.
"The board itself will conduct the independent investigation," he said. "We will obviously take a look at what the committee's done so far. If we're not satisfied with it, we'll go back over it."
Asked whether all shareholders will be told if wrongdoing is uncovered, he said, "yes."
"We will examine all prior conduct and do what we have to do."
The deal between Bogatin and Voorheis to remove five directors and appoint a new board was hammered out in about two hours in the hallways of the Calgary courthouse as a judge delayed the start of a hearing to force their removal and move up a special shareholders' meeting set for Nov. 17.
The institutions were armed with a 71-paragraph affidavit, which included allegations of wrongdoing, points of concern and accusations of impropriety against some board members.
The directors who resigned are former chairman Harry Antes, former chief operating officer Igor Fisherman, U.S. businessman Frank Greenwald, and British Columbia-based directors Michael Schmidt and Kenneth Davies.
Bogatin asked most of them to submit resignation letters on Monday "just in case" they were needed.
Voorheis said a new chairman still has to be picked, as does the date of a shareholders' meeting.
(FWIW, this will be my final post on the YBM affair -- other matters now fully occupy my time. Cheers everyone, Adrian)
|
