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