Boss's board continues to deceive shareholders
Board's offer motivated by self-interest in breach of its fiduciary duties
VANCOUVER, Sept. 24, 2013 /CNW/ - Morning Star Resources Ltd. (the "Concerned Shareholder") today responded to Boss Power Corp.'s news release of September 23, 2013.
In making its public "offer", Boss's management again demonstrates that it has no concept of running a public company in a fair, honest and ethical manner. A real offer made to settle would allow full dialogue and discussion on the settlement terms. By issuing a news release announcing the offer on the day that it was sent to the President of the Concerned Shareholder, the board continues to make a mockery of the negotiation process.
The board's claim that its offer is substantiated by an "independent" valuation report is a farce. The board is trying to absolve itself of its fiduciary duties by relying entirely on a biased report. The report was prepared on behalf of Boss, was paid for by Boss, and was based on information provided by Boss to the valuator ("RPA"). The Concerned Shareholder was given no input on the report whatsoever.
Not only is the report self-serving and biased, it is unreliable. On its face, the report states that it is "not consistent with CIMVal reporting requirements." The report then states that RPA "does not guarantee the validity or accuracy of conclusions or recommendations" contained in the report. RPA also tries to limit its liabilities by stating that RPA "accepts no responsibility for damages" in any way resulting from the use of the report. Why is the report so heavily qualified? It is because, as the facts show, the self-serving report is another desperate attempt by the board to use questionable methods to gain shareholder sympathy in advance of the upcoming shareholders' meeting.
The Concerned Shareholder has been able to locate a report prepared by the same valuator, RPA, for Boss six months ago in March 2013. In that report, RPA valued three claims (approximately 20% of the B claims). These three claims alone were assigned a "reasonable market value" by RPA of up to $1 MILLION. By extrapolation, THE FAIR MARKET VALUE OF THE B CLAIMS THAT WERE INCLUDED IN THE SETTLMENT IS $4 MILLION. As the board is aware, the $4 million valuation is almost identical to an agreement that Mr. Beruschi had to sell the B claims to a third party immediately prior to the Province's exploration ban. The board not only chose to not inform shareholders of the existence of this agreement in its previous news release, but this fact was also omitted entirely from the report.
The board's tactic in having successive reports prepared is obvious, and it is clear why the board chose to hide the prior report from shareholders. "How many reports did the board actually have the valuator prepare before the valuator delivered a report that contained a value that the board wanted? The board's repeated arrogance in trying to mislead shareholders, this time regarding the value of the B claims on the back of a self-serving valuation, insults shareholders' intelligence," said Mr. Beruschi. Alarmingly, both valuations make it clear that the board's suggestion in its September 12, 2013 news release, at which time it had both valuations in hand, that the B claims were "of no real value" was KNOWINGLY false. "The board cannot, with honesty and integrity, ask shareholders to believe the board's latest concoction on the value of the B claims when it clearly withheld the truth from shareholders just two weeks ago," stated Mr. Beruschi.
The board also failed to inform shareholders in its news release that as a pre-condition for any settlement, it is seeking a full release of all claims that the President of the Concerned Shareholder may have against Boss's directors and representatives for, among other things, wrongfully including the B claims in the $30 million settlement. The reason for this is simple. The board is looking to protect itself and its advisors from potential liability for its blatant breaches of trust. Clearly, the offer that was published was the board's offer, not Boss's, and was from the board's lawyers, not Boss's. The Concerned Shareholder has repeatedly told shareholders of the fundamental conflict of interest that exists between the personal interests of Ron Netolitzky and John Bowles and the best interests of Boss and its shareholders. Undoubtedly, the personal conflicts of interest of the board are standing in the way of a fair and reasonable resolution to the dispute on the B claims and the closing of the $30 million settlement.
"I have repeatedly insisted that any monies paid by Boss to settle the B claims should properly be recouped from those responsible - certain members of the incumbent board and Boss's advisors who were responsible for the breach of trust," stated Mr. Beruschi. The directors responsible are clearly acting in their own self-interest by trying to muddle the settlement of the B claims with the protection of their own wrong-doing.
"Any offer by the board that does not include the immediate resignation of at least a majority of the incumbent directors is insufficient," Mr. Beruschi said. The path forward is simple. The board of directors must resign and be replaced with independent directors nominated by the Concerned Shareholder that have no vested interest in the settlement. Once an independent board is appointed that will act in accordance with its fiduciary duties and in the best interests of ALL shareholders, the Concerned Shareholder will allow the B claims to be delivered to close the $30 million settlement. "At that point, the Court can determine the proper value of the B claims based on a valuation that is actually independent and fair," Mr. Beruschi said. Although the incumbent directors may believe that entrenching themselves is in the best interests of Boss, it is clearly not. Boss's best interests will be served once a majority of the incumbent board is replaced and the $30 million settlement is put out of risk for the benefit of all shareholders.
Information on the names and backgrounds of the Concerned Shareholder's proposed director nominees, as well as detailed reasons to support the Concerned Shareholder's position, will be more fully described in a detailed information circular to be mailed to shareholders and filed on SEDAR in due course in advance of the November 14, 2013 shareholders' meeting.
SOURCE: Morning Star Resources Ltd.
For further information:
Anthony J. Beruschi
Morning Star Resources Ltd.
Telephone: (604) 417-3657