A pair of local businessmen has launched a no-holds-barred battle to topple a Manhattan financier who has amassed millions in compensation while his firm, Rand Logistics Inc., has faltered.
Jonathan Evans and Sean O’Connor of the Carmel investment firm JWEST LLC are in an escalating war of words with financier Laurence Levy as a key shareholder vote on Sept. 23 approaches.
After Levy, who operates from the 50th floor of a Fifth Avenue skyscraper, filed a presentation with the Securities and Exchange Commission casting Rand’s performance in a positive light, Evans fired back with his own sharply worded missive.
“You once again have done a fine job of spinning a struggling company in a way that appears very positive,” Evans wrote to the Levy-led board. “However, your smoke and mirrors approach is fooling nobody, as evidenced by Rand Logistics’ stock price.”
Rand, a shipper of coal, salt and other products through the Great Lakes, should be thriving, Evans and O’Connor believe, given that it faces little direct competition in its niche and the cost of vessels creates high barriers to entry. They’re also buoyed by larger trends, including rising costs and congestion on rail lines, making waterways more attractive.
But since going public in 2004 at $6 a share, 30 cents below where it now trades, Rand has had a litany of stumbles, from mechanical problems that sidelined ships to repeatedly missed earnings expectations.
“It’s a perennial over-promise and under-deliver story,” said Evans, 45, who worked in investment research at Heartland Capital Management, Conseco Capital Management and Wells Capital Management before launching JWEST in early 2013. The firm, which manages $135 million, owns 1.5 million Rand shares, an 8-percent stake worth $9.3 million.
Evans and O’Connor, 53, the managing member of JWEST and a founder of the Carmel CPA firm Dauby O’Connor & Zaleski, are seeking to win election to the six-member board on Sept. 23 by garnering more votes than two board-backed incumbents.
Their ultimate goal: To elevate existing independent director Michael Lundin to chairman, replacing Levy, who would leave the company. Rather than disrupt all aspects of management, perhaps unsettling customers, they propose appointing current President Ed Levy (who has no familial tie to Laurence) to the vacant CEO slot, and hiring a shipping-industry veteran as COO.
Evans, JWEST’s chief investment officer, said the firm has stumbled partly because management is too far from the business, with both Levys working from the Fifth Avenue office and the CFO based in Boston.
Making matter worse, Laurence Levy owns or runs numerous other firms that compete for his attention, said another critic, Bobby Melnick, whose New York-based Terrier Partners owns a 3-percent stake.
Levy, Rand’s 58-year-old executive chairman, didn’t return calls. A presentation Rand filed with the SEC is loaded with charts showing the firm actually is doing well. One notes that $100 invested in Rand in August 2009 is worth $231 today.
But Melnick scoffs at Levy’s selective use of data. He noted the starting point for the chart appoximates the stock’s all-time low.
“His presentation is fundamentally not an honest presentation,” said Melnick, who in a March 2013 letter blasted directors for “allowing a part-time CEO with no industry experience to run the company and reap outsized compensation,” despite weak results.
Soon thereafter, Rand’s board moved Levy out of the CEO post but named him executive chairman, with duties including culture and “organization building.”
But the move didn’t lighten his wallet. In the fiscal year ending in March, he received salary, stock awards and other compensation totaling $780,571, up from $696,042 the prior year. Over the past five years, his compensation has totaled $3.9 million.
Beyond compensation issues, critics don’t like that Rand rents its Manhattan office space from an affiliate of Hyde Park, Levy’s private equity firm—a relationship they call self-dealing. Under the arrangement, Rand paid $165,000 in rent and $45,000 in office expenses last year.
No big deal, Rand asserts in an SEC filing. Hyde Park provides the space “on economically favorable terms. … Rent and related payments [are] made on a pass-through basis at actual out of pocket costs.”
But Melnick says he doesn’t even know what “pass-through basis” means. And he said Rand’s overall argument is nonsensical, since the company would never be renting space in high-rent Manhattan, far from its shipping business, were it not for Levy’s personal desire to work from there.•