Follow up on Norma Provencio, Valeant and Signalife/Heartronics

Valeant has offered a short reply to my last post. To quote in full:

We understand that Ms. Provencio participated in a private placement in May 2003 and completely sold her position in 2004.  We also understand that Mr. Stein was neither an officer nor director of Signalife during the time period of Ms. Provencio’s investment. According to Mr. Stein’s indictment, his fraudulent activities began in July 2005.

The background is that Ms Provencio, the chair of Valeant's audit committee had held the same position at Heartronics/Signalife which has since been exposed as a major fraud and where the principal (Mr Stein) is in prison.

So lets take the defence of Ms Provencio as read.

Valeant seem to accept that Mr Stein's fraudulent activities began in July 2005.

Ms Provencio joined the Heartronics/Signalife board on 29 July 2005.

Her tenure as chair of the audit committee coincided to the month the beginning of outright criminality.

Moreover we know she previously co-invested in Heartronics/Signalife with Mr Stein. To quote and earlier annual report:

On May 15, 2003, we completed the first tranche of a private placement pursuant to which we sold 82,667 units to Mr. Mitchell Stein, SJ Investments and Ms. Norma Provencio at $3 per unit for cash amounting to $248,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3 until May 14, 2004. Upon exercise of the warrants each investor will receive one common share and an additional warrant to purchase one common share $6 per share until November 15, 2004.

Sure Mr Stein was not a director at the time of that investment - but he was certainly influential. After all the earlier annual report also notes this:

Mr. Stein is the spouse of Ms. Tracey Hampton, who owns and controls ARC Finance Group, LLC, which owns approximately 69.6% of our outstanding common shares.

So whilst Mr Stein was not a director Norma Provencio would have known she was investing in what was for practical purposes Mr Stein's family business.

Later she joined the board and served as chair of the audit committee. Coincident to the month the accounts were wildly and fraudulently faked and Mr Stein's family began dumping huge amounts of stock. 

Let me repeat: Ms Provencio joining the board (and audit committee) matched to the month the start of outright criminal behavior.

Ms Provencio should resign from the Valeant board immediately. The creditors (who are at risk of not being repaid) should demand it.

If Ms Provencio does not resign the other board members should resign to protect their reputations and state their disagreement.

John

PS. And this is worth stating: Ms Provencio can "see no evil". A previous Valeant press release stated:

The only financial reporting matter that Ms. Provencio is specifically aware of that overlapped with her tenure on the Signalife board is a sale in September 2006 of $190,170 that was alleged to have not been a legitimate sale.  With respect to that specific matter, the SEC complaint states that it was concealed from that company’s CFO, auditors, outside counsel and other officers.

Hey - there was an indictment that said the criminal activity started in July 2005. There was a trial. There was a conviction.

But according to a Valeant press release Ms Provencio is unaware of any financial reporting matter that overlapped her tenure starting in July 2005.

There is blissfully unaware, there is blind, there is wilfully blind and there is Ms Norma Provencio.

I mean seriously - after an indictment, trial and conviction regarding a company on which she was the chair of the audit committee she is still unaware.

This so strains credibility as to be ridiculous.




J

Valeant and Norma Provencio: Hmmm...

In December Bloomberg published an article observing that Norma Provencio (the head of the Board's Audit Committee) had held a similar position in a company (Heartronics/Signalife) which had been exposed as a major fraud.

Mitchell Stein - the key executive at Heartronics/Signalife went to prison. The Valeant press release (repeated in full below) states:

Ms. Provencio has followed the criminal case against Mr. Stein and believes that the matter was handled appropriately.

The same press release also absolves Norma Provencio from a long involvement in the fraud by stating:

With respect to her tenure at Signalife, Ms. Provencio served as a member of the Board of Directors and chair of its Audit Committee from  July 2005 to June 2007.  She chose not stand for re-election to the board of directors of Signalife.

In other words Ms Provencio was not there very long, certainly not involved since inception and she thinks the criminal case was handled appropriately.

Except that Norma Provencio was there from ear inception and was in business with Mitchell Stein from the first involvement I can find from Mitchell Stein.  Here is a link for an annual report for Recom Managed Services. That is the company that by reverse merger became Signalife/Heartronics.

And that report makes clear that the original funding for the deals came from Norma Provencio and Mitchell Stein.

On May 15, 2003, we completed the first tranche of a private placement pursuant to which we sold 82,667 units to Mr. Mitchell Stein, SJ Investments and Ms. Norma Provencio at $3 per unit for cash amounting to $248,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3 until May 14, 2004. Upon exercise of the warrants each investor will receive one common share and an additional warrant to purchase one common share $6 per share until November 15, 2004.

So Norma Provencio - chair of the Audit Committee of Valeant - was in business with the convicted crook from the inception of the criminal business and over two years prior to what Valeant press-releases as her involvement.

Valeant elided that fact in their press release (repeated in full below). Whether Valeant PR elided that fact deliberately matters.

Either

(a) Provencio misled Valeant as to the nature of her involvement with Mitchell Stein, the convicted perpetrator of the Heartronics/Signalife fraud (and Valeant did not knowingly elide the truth in their press release) or

(b) Valeant is actively and deliberately misleading about the time that Ms Provencio was in business with the convicted criminal.

The second is unthinkable. Norma Provencio should resign from the Valeant board.




John Hempton




The Full Valeant release:

The Facts on Norma Provencio’s Tenure as a Director of Valeant Pharmaceuticals

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December 15, 2015

• Bloomberg News has published an article examining Norma Provencio’s tenure on the Board of Directors of Signalife and Valeant. In connection with this inquiry, Valeant provided the following information to Bloomberg News:
  Ms. Provencio  was first elected, as a non-incumbent nominee, to Legacy Valeant’s board in 2007.  More than 95% of the votes cast by shareholders with respect to her nomination were cast “for” Ms. Provencio’s election to the Legacy Valeant Board.  In nominating Ms. Provencio, the Legacy Valeant Board, thorough its Corporate Governance/Nominating Committee, a customary background check and interview process was conducted.
  Ms. Provencio was appointed chairperson of the Audit and Risk Committee of VPII (the current company, as surviving company of the 2010 Biovail-Legacy Valeant merger) in 2011.  Ms. Provencio served as the Chairperson of the Finance and Audit Committee of VPI from May 2008 until the Biovail merger in September 2010.  So, in addition to her accomplished professional background and qualifications, the Board had actual experience working with Ms. Provencio, as a director and as an audit committee chair, and obviously felt comfortable with entrusting her with as the Chairperson of VPII’s Audit and Risk Committee since 2011.
  Ms. Provencio has many years of financial and industry experience that make her well qualified to serve on Valeant’s Board. Ms. Provencio has been a certified public accountant since 1981 and served as the audit partner on numerous public companies with complex accounting issues during her public accounting career.  She has also lead numerous investigations for public and private companies and has been the forensic accountant  for numerous special committees during her professional career.
  The Board has determined that Ms. Provencio’s many years of sophisticated financial and industry specific experience at Provencio Advisory Services, Inc., KPMG LLP and Arthur Andersen, her service on the board and finance and audit committee of VPI, her wealth of knowledge in dealing with financial and accounting matters and the depth and breadth of her exposure to complex financial issues qualify her to be a member of the Board and the committees on which she sits.
  Ms. Provencio’s directorship with Signalife was disclosed in Valeant’s proxy statement, in compliance with applicable SEC rules. Prior to 2010, the proxy rules required disclosure of then-current public company directorships.  Accordingly, Valeant’s 2007 proxy disclosed Ms. Provencio’s directorship with Signalife.  Beginning in 2010, the proxy disclosure rules introduced a 5-year look back, and accordingly, Valeant’s proxy statements filed in 2010, 2011, 2012 and 2013 disclosed Ms. Provencio’s previous directorship with Signalife.
  The ad hoc committee was appointed by the Board of Directors to review allegations related to the company’s business relationship with Philidor and related matters, and consists entirely of independent directors.
  The votes appointing Ms. Provencio to the ad hoc committee and as chairperson to of the ARC were unanimous. And at each election of directors since Ms. Provencio was appointed to the Legacy Valeant board in 2007, she received the overwhelming support of shareholders as demonstrated by the shareholder vote.
  Mike Pearson commented, “Since I have known Norma Provencio, she has acted with integrity and displayed sound business judgment, and I believe that she is exceptionally well qualified to lead our Board’s Audit & Risk Committee.”
  ***
  With respect to her tenure at Signalife, Ms. Provencio served as a member of the Board of Directors and chair of its Audit Committee from  July 2005 to June 2007.  She chose not stand for re-election to the board of directors of Signalife.
  The only financial reporting matter that Ms. Provencio is specifically aware of that overlapped with her tenure on the Signalife board is a sale in September 2006 of $190,170 that was alleged to have not been a legitimate sale.  With respect to that specific matter, the SEC complaint states that it was concealed from that company’s CFO, auditors, outside counsel and other officers.
  Signalife engaged outside CPA firms to perform its accounting functions during Ms. Provencio’s tenure on the board.  The CPA firms included Robert C. Scherne, CPA, PC  and Pickard & Green.  Both CPA firms provided accounting and other management consulting services for small companies, including preparing required SEC filings for public companies.
  Ms. Provencio has followed the criminal case against Mr. Stein and believes that the matter was handled appropriately.

Post script: The original reverse merger was in the second half of 2002 as per the annual report described above. Mitchell Stein's name does not appear before 2003 and appears in precisely the same deal as Norma Provencio.

Does News Corp really employ journalists who think there is no difference between the Islamic State and the Jewish State?

This is a tweet from Michelle Celarier at the New York Post.  

To quote: "Islamic state. Jewish state. What is the difference?"

I follow her because she is the most anti-Herbalife journalist out there. She also makes up her stories including several details this hit-piece about me.

No more need be said.




John

Post-script: It appears Ms Celarier has been fired from the New York Post. I do not know whether this tweet had anything to do with it - but she has had a total disregard for facts for some time. Her firing is (a) deserved and (b) unsurprising.

J