Investor
is seeking a voice on Advanced Marketing Services board
Frustrated by Advanced Marketing Services' unwillingness
to share information, a major shareholder moved yesterday
to nominate three representatives to the beleaguered company's
board of directors.
Robert E. Robotti, a New York investor with a 7.1 percent
stake in AMS, argues that the company's board and management
have refused to disclose basic information over the past
three months. By naming his own directors to the board,
Robotti intends to ensure stockholder representation,
according to documents filed with government regulators.
The once high-flying San Diego company was hurt by an
accounting scandal that erupted in 2003. The company,
which has been struggling to recover since then, describes
itself as a leading provider of customized publishing
services with 1,400 employees.
In March, AMS restated its financial results for a five-year
period.
The restatement, which was triggered by a federal probe
that uncovered a scheme to fraudulently inflate AMS' profits,
lowered the company's earnings for the period but claimed
sales, in 2005, for example, of more than $915 million.
But AMS has not released a restatement that has been
certified by its auditor, and in June, the company announced
it was deregistering its common stock.
That way, the company said, it would no longer be required
to file regular financial statements with the U.S. Securities
and Exchange Commission. AMS said at the time that the
cost and commitment of management's time to meeting "increasing"
regulatory requirements could no longer be justified.
Even so, the company could still post equivalent financial
information on its Web site and hold regular conference
calls for shareholders, said Matthew J. Day, a lawyer
representing Robotti.
Instead, "they haven't told us anything," Day
said. "They just keep giving us the company line
that we'll hear from them when the board has formulated
a plan. We're concerned that we'll never hear from them
again, and my client thinks it's time to force the issue."
Robotti formally notified the company yesterday that
he plans to nominate himself, his wife, Suzanne, and Chris
Sansone, a broker with Robotti & Co. to AMS' seven-member
board of directors.
"My client feels that after three years of ignoring
shareholders, other people out there may be receptive
to his arguments," Day said.
Because the company hasn't held a shareholders meeting
since 2003, Day said, it would be just as easy, legally,
to seek replacements for the entire board.
"He's not trying to take over the company, assuming
he gets a positive response," Day said. "We
could argue that all seven directors should be for up
for election since the company has not held board elections
for three years."
In a letter Sept. 5 to the company, which was included
as part of Robotti's SEC filing, the New York investor
said the company has ignored his requests for information
since June 20.
In the letter, Robotti asked:
--What is the current financial position of the company?
--What are the reasons for the deregistration of the
company's stock and its plans for future reporting of
financial and other information?
--What is the company's short-term and long-term strategic
direction?
--hat are the reasons for the departure of Bruce C. Myers
as president and chief executive and his replacement by
Gary M. Rautenstrauch?
--What are the reasons for and the intended outcome of
any other recent staffing changes?
In the letter, Robotti also noted rumors that Advanced
Marketing has retained an investment bank to help refinance
its debt and that a hedge fund had acquired the debt.
A call to Gary Lloyd, AMS' general counsel, which included
a request for comment from Rautenstrauch, the company's
current chief executive, went unanswered yesterday afternoon.
Rautenstrauch, who was appointed in May, is the fourth
person, including interim CEOs, to head the company since
the scandal broke in 2003.
Shares of AMS have been listed on the pink sheets since
the company was delisted from the New York Stock Exchange
for failing to file regular financial reports with the
SEC.
Three AMS marketing executives were indicted in March
2005 for their role in a scheme to defraud AMS clients
and falsify earnings. All three later pleaded guilty.
