Herb Greenberg weighs in with an opinion...
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AremisSoft: Not Answering Questions, Not
Telling the Whole Story
By Herb Greenberg
Senior Columnist
7/6/01 3:31 PM ET
Not telling the whole story, lapses in explanations or simply not answering
questions continues at AremisSoft (AREM:Nasdaq - news - commentary).
Most of the focus, so far, has been on whether the company last year
received $7 million from Bulgaria's National Health Insurance Fund, as
AremisSoft claims, or $1.7 million, as has been claimed by the fund. The
company has not explained the discrepancy.
But that's not the only question AremisSoft won't address.
Consider the case of Info-Quest, a Greek company. In 1999 Info-Quest
bought 3 million shares of stock from AremisSoft and AremisSoft CEO
Lycourgos Kyprianou. Then, last year, Info-Quest said in an SEC filing that it
had bought another 692,923 AremisSoft shares "from AremisSoft." Funny,
AremisSoft never disclosed selling any shares to Info-Quest then. So, if not
AremisSoft, from whom did Info-Quest buy the shares? (I ask only because
according to its SEC filings, Info-Quest deposited the proceeds, in escrow,
with AremisSoft's attorneys, which suggests the shares are from AremisSoft
or insiders.)
I asked that question on June 22, in an email to AremisSoft Executive Vice
President Paul Bloom, as well as an official of Info-Quest, and both responded
that shares were bought from "selling shareholders," not AremisSoft.
(Info-Quest followed up with an amended 13-D that included the clarification.
This was the second of my inquiries, in recent weeks, that resulted in an
amended SEC filing related to AremisSoft. The first was its 10-K, which was
amended after I made an inquiry by email about why AremisSoft didn't include
a signed copy of its independent auditors report. Talk about lapses!)
OK, so who were the selling shareholders? Neither AremisSoft nor Info-Quest
will say. Bloom said he would forward my question, though didn't say to whom
he was forwarding it. (I never received a response from the forwardee.) If the
sellers were insiders, shouldn't the sellers have filed the sale with the SEC?
Or were these unregistered shares sold in a private transaction? Or were the
shares from nonexecutive holders who owned the shares long enough to avoid
an above-the-radar filing on the SEC's EDGAR system? Whatever the case,
it's a simple question to which there undoubtedly is a simple answer.
(Info-Quest has since dumped a large chunk of its AremisSoft holdings, with
most of the sales in recent weeks. No explanation was given for the sales.)
Next, there's a question about who AremisSoft Chief Financial Officer Michael
Tymvios really works for. His bio in AremisSoft's prior proxy statements says
that from 1991 to 1999 he was a partner at Morison International, which
AremisSoft describes as "a certified public accounting firm" based in the
United Kingdom. However, Bridgette Ovesen, executive director of Morison,
told my associate, Mark Martinez, that Tymvios wasn't a partner at Morison
because Morison has no partners.
Instead, she says, Tymvios is a partner at his own Cyprus accounting firm,
Patsalides & Tymvios, which is a member of Morison's network. (That's
confirmed, oddly enough, by Patsalides & Tymvios' Web site, which bills the
firm as "an associate member" of Morison. One of its specialties, by the way,
is helping set up offshore companies.) Ovesen adds that Tymvios is still a
partner in Patsalides & Tymvios, and his firm is still part of the network. So
which one is his full-time gig? Being CFO of AremisSoft or being partner in his
own accounting firm? I asked Bloom about Tymvios on June 29, via email, and
he never responded to the question. But (surprise, surprise) in an SEC filing
today, the company revised Tymvios' bio (the third change following one of my
questions!) to indicate that his relationship with his accounting firm lasted
from 1991 to 1999. (But that's not what Morison's Ovesen says!) And
AremisSoft also changed its description of Morison from being "a certified
public accounting firm" to " a network of independent accountants, tax
advisers, business consultants and lawyers." (Can't help but wonder what
other details will need to be revised.)
Oh, and that bit about Morison being an accounting firm? Not exactly.
According to Morison's Web site, Morison is a "world wide network of
professional business advisers, founded in 1990." I asked Bloom about
Tymvios last Friday, via email, along with several other questions, including
whether the company would ever respond to my prior question about who the
selling shareholders were. Bloom responded, but about something else I had
asked -- not about Tymvios or the identity of the "selling shareholders" who
sold to Info-Quest.
The question Bloom did respond to was why AremisSoft doesn't disclose,
somewhere in its proxy, that AremisSoft CEO Kyprianou is also
"nonexecutive chairman" of GlobalSoft, a Cyprus company in which
AremisSoft owns a 7.1% stake. (According to GlobalSoft's listing on the
Cyprus Stock Exchange, Kyprianou is also president of GlobalSoft.)
AremisSoft has disclosed Kyprianou's dual chairmanships in various press
releases and other public filings, but not in the one place you would expect to
see it: the proxy. Why not? Because, according to a company press release
Bloom referred me to, Kyprianou doesn't "directly" own any stock in
GlobalSoft. (He indirectly owns it through AremisSoft, in which he owns 3.78
million shares, or 9.62%.)
Which brings us to GlobalSoft (officially listed on the Cyprus exchange as
L.K. GlobalSoft, with the L.K. standing for Lycourgos Kyprianou): In April,
AremisSoft announced plans to boost its GlobalSoft stake to a controlling
59.5%. Last month, AremisSoft abruptly canceled the plan. Since then, the
stock of GlobalSoft, which makes software, has plunged, which is not good
news for GlobalSoft's nine largest investors, who bought majority control of
GlobalSoft's stock in late 1999.
In its prospectus (according to a translation from Greek), GlobalSoft said the
shares were shifted to those investors to "obtain a further broadening of the
capital base." Interestingly, six of those investors were registered on the
same day by the same attorney in the British Virgin Islands -- just two weeks
before they received the GlobalSoft shares. (For what it's worth, several
months earlier, an investment partnership whose sole purpose is managing
Kyprianou's stock option investments -- Sincock Holdings -- was registered
in the British Virgin Islands, using the same attorney. Kyprianou is identified
in an SEC filing as Sincock's investment manager.)
Not answering questions and not telling the whole story extends to
AremisSoft investor Irwin Jacobs, who seems to be acting as the de facto
spokesman for AremisSoft. Jacobs has taken numerous swipes at this
column in recent weeks for its coverage of AremisSoft. Much of Jacobs'
commentary, though, has been message board-esque: not telling quite the
whole story (and then not alerting readers when he changes the information).
On June 8, for example, Jacobs wrote on his Web site that Info-Quest had
publicly stated its intention to sell 1.5 million shares of AremisSoft "over 12 to
18 months. I understand," he wrote, "that they have already sold one million
shares." He then said he believed an SEC filing by the company to sell
another 500,000 shares "should complete their selling program." He added
that the Info-Quest sales "shouldn't be of any concern" because they're not
dilutive to existing holders and to his knowledge Info-Quest "is actually
looking for a price above $15 for their shares."
Jacobs later altered his letter (without any notice that it had been changed) to
remove the mention of price. For good reason: As it turns out, based on its
amended 13-D last week, Info-Quest actually sold nearly 2.2 million shares,
not 1.5 million. And the selling continues well beyond June 8 -- until June 27,
at prices that dipped below $13. What's more, earlier this week, Info-Quest
filed to sell another 480,000 shares. What does Jacobs think of Info-Quest's
sales now? He didn't respond to my email last week asking why there was a
discrepancy between what he wrote and what actually happened.
Not answering questions is common for companies under fire. But for a
company to simply ignore some questions, while answering others, is off the
baseline. Then again, so is the entire AremisSoft story.
Editor's note: In a lawsuit filed Tuesday in U.S. District Court in San
Francisco, AremisSoft claimed TheStreet.com and a number of hedge funds
conspired to drive down the price of the software maker's stock. Click here to
read more.
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's
editorial policy, he doesn't own or short individual stocks, though he owns
stock in TheStreet.com. He also doesn't invest in hedge funds or other
private investment partnerships. He welcomes your feedback and invites you
to send any to Herb Greenberg. Greenberg also writes a monthly column for
Fortune.
Brian Harris assisted with the reporting of this column.
KJC |
