Three brief items

1. Chicago Sun-Times solicitations.

The next best thing to a proxy fight is a consent solicitation campaign.

It is a more slow-motion, though. The shareholders seeking a material change solicit written consent to that change from more than 50% of the outstanding voting shares. This is often more difficult than winning a true proxy campaign, after all, in the case of a consent solicitation, inaction always amounts to a pro-management vote, a refusal to consent to the change.

Anyway: the Davidson Kempner hedge fund wants a new board of directors on the Sun-Times. They've sent a letter of solicitation that blames the incumbents for "the near total erosion of stockholder value."

On Thursday, December 11, the Chicago Sun-Times announced that the proxy-advisory firm Glass Lewis & Co. is taking its side.

2. Bullish report on Asian securities exchanges.

The consultancy Celent has posted a report on the Asian securities exchanges as businesses. It's pretty bullish.

The report says that a total of more than 14 trillion shares, with a value equivalent to $21 trillion US dollars, was traded on the major Asian exchanges in 2007. the top six of those exchanges account for 80% of that value.

The author of the report, Arin Ray, says: "The Asian exchange industry, following a worldwide trend, has undergone major changes in structure and governance model, and many exchanges have become publicly traded companies through demutualization. The exchanges are highly profitable and growing, with an average profitability of almost 50 percent.”

3. On Madoff.

When the Bernie Madoff story first broke I wrote here about the "payment for order flow" angle, postulating that Madoff's determined defense of that practice back in May 2000 should already have been a red flag to the observant.

I'm happy to report that I'm not the only one thinking along those lines. On December 24, the Financial Times ran a story by Greg Farrell under the headline "SEC inaction that helped fuel scheme."

The second graf of this story reads: "But it was the SEC's decision in the 1990s not to take a stand on the controversial issue of 'payment for order flow' that helped fuel the rise of Bernard Madoff Investment Securities, the successful broker-dealer operation two floors above Mr Madoff's private fund operation in Manhattan."

That way of putting it implies a government-centered way of looking at the world. There are lots of parties other than the SEC who missed this and shouldhave gotten it -- like the folks responsible for due diligence at the various institutions than invested in Madoff's operations.

Still, I do think the whole idea of payment-for-order-flow stinks. If the Madoff meltdown does help finally discredit it, that will be some slender silver lining.

Orient Express: in Peru?

I offered two entries to this blog in October that discussed a dispute among shareholders of Orient Express Hotels Ltd.

I mentioned of course that the company operates the railroad for which it is named. What I didn't say at the time (because I wasn't aware of it) was that it also operates rail service to Machu Picchu, the great Peruvian/Andean archeological site and tourist attraction.

Now the government of Peru has indicated that it wants to withdraw the company's concession for that trip -- or, at least, withdraw the monopoly right, and stimulate competition in order to bring down fares and encourage more tourism.

Meanwhile, the Swiss finance firm Reyl & Cie, which owns around 8% of the equity of Orient Express, expressed great confidence in the firm's long-term profitability, despiute a recent stock price slide.

Reuters is quoting Francois Reyl, chief executive of Reyl & Cie, thus: "We are long time players. There is great value embedded in this company."

Reyl said nothing about the Peru situation specifically. He said, though: "The stock has been penalized by fighting between shareholders over the legal structure of the company. We are confident that, over time, these types of squabbles will recede."

Those types of squabbles are of course what first caught my attention this autumn.

Tecumseh litigation

The Herrick Foundation, which was defeated in a proxy challenge to incumbent management at Tecumseh Products last month, has won a victory in court.

Herrick filed a lawsuit demanding injunctive relief against the compressor manufacturer's recapitalization plans, which would have significantly diluted Herrick's voting rights.

The judge of a Michigan state court, Timothy Pickard, granted a preliminary injunction on December 24, finding "substantial likelihood" that the plaintiff would prevail in its claims that the stock split is inequitable, without compelling justification, and a violation of the company charter.

Herrick Foundation spokesman Jeff Caponigro issued this response: "Tecumseh likes to portray Herrick Foundation's dispute as simply a vendetta against the company when, in reality, it is the company's own vendetta toward the Herrick's that has led it to repeatedly take improper actions that are negatively impacting all company shareholders."

Sirius XM: Meeting Results and Litigation

Sirius XM, the satellite radio company, held its shareholder meeting one week before Christmas.

The stockholders approved all four of the pending measures: re-electing the board of directors, amending the charter to increase the number of authorized shares, authorizing a reverse stock split, and ratifying the appointment of KPMG as the independent auditor.

Shareholder Michael Hartleib had sought to have this meeting postponed. Obviously, he didn't succeed in that. But his lawsuit, in the central federal district of California, continues. How much longer this case will continue may turn on whether the court reads the complaint as an effort to sue Sirius (the pre-merger entity) on behalf of itself.

For those of you interested in looking it up, the caption of the lawsuit is: Hartleib v. Sirius Satellite Radio Inc.et al. The docket number is 08-cv-00790.

On November 17, defendants in that lawsuit filed a motion for its dismissal. I gave the background of that, the last time I wrote on Sirius in this blog. I'll try not to repeat myself too much. But the next two paragraphs are by way of review.

The complaint focuses on the merger as a breach of fiduciary obligation. "The Board and officers of Sirius ... grossly mismanaged its operations by engaging in reckless financing of the merger [ignoring] warning signs that the merger ... would severely damage Sirius Satellite Radio Inc." Plaintiff says that shares of Sirius traded at about $2 a share before the merger, and have since (as of late October) fallen to 29 cents per share.

In the motion to dismiss, defendants say that such charges are "without particularized facts about the individual directors' supposed conflicts. Likewise, Hartleib carelessly accuses the Board of misconduct ... without identifying specific wrongdoing by any particular member."

In a memorandum opposing dismissal, Hartleib's attorneys (led by Bernard C. Jasper of Irvine, Calif.) explain their view that Hartleib is in a position to sue both derivatively (as a representative shareholder) and directly (as someone who suffered harm distinct from that of other shareholders). A derivative lawsuit involves the claim that the object of the fraud is the corporation itself, which for various reasons (here, the capture of the board by the alleged fraudsters) has declined to or cannot sue on its own behalf.

"Hartleib has standing to sue derivatively because Sirius could sue directly," reads one of the subheads.

The complaint alleges that a RICO enterprise was conceived and hatched by XM, Interoperable Technologies, and various individual defendants. The complaint did not name Sirius itself as a participant in the alleged RICO, accordingly he is not in the untenable positionof eeking to sue Sirius (with regard to those particular accusations of the complaint) on behalf of itself.

The caption of the case really isn't much of a help in making this particular point, because as noted above Sirius is the first named defendant.

Anyway, the defendants replied in a brief dated Dec. 8, re-asserting the case as they see it for dismissal. Short summary of the reply memo as respects the derivatives claim, "yes, you did too." Defendants contend that the RICO claims of the complaint in its two incarnations (it was amended once in response to an earlier motion to dismiss) do too in their sweeping language implicate Sirius as part of the Racketeering Influenced Corrupt Organization.

What do I think? I think that consolidation was inevitable. There's only room for one major satellite-radio provider. So I think efforts to characterize this consolidation as racketeering are dubious.

But, hey, I'm watching and learning with the rest of you as this unfolds.

That SRZ report

Schulte Roth & Zabel have put out a report on "current trends in activist investing" and what affected parties expect in this area during the year ahead. I linked to it yesterday, but this post will serve as an executive summary.

SRZ commissioned a survey of 25 corporate execs and 25 activist investors. As you might expect, there were points of disagreement between the two groups. "Corporate respondents tend to view activist investors as short-term investors out to make the highest returns possible in the shortest window of time ...." On one specific manifestation of that view, a majority of the execs said that the SEC should not adopt rules that would provide shareholder access to the company's proxy statement. A very considerable majority of the activists said that they do think the SEC should adopt such a rule.

The two sides of the survey differed also on the issue of the amount of activism they expect in 2009. The activists themselves think they'll have a busy year, whereas the corporate types think the recession will temper would-be proxy fights and such.

Only one of the activists surveyed said that litigation is the best approach to produce change in corporate policy [or "4% of the sample" in the language of pollsters -- we're supposed to remember at this point in the report that the sample consisted of 25.] None of the execs identified litigation as an effective strategy.

David Rosewater, a partner at SRZ, summed up the gist of the survey thus: "There is clearly a continuing wide gulf in the views of companies versus activists of the appropriateness of activists' engagement and involvement with the company abouyt its strategy. As a result, it seems likely that contentious contests will continue for the foreseeable future."

We might hope for "peace on earth, good will to men," but too much peace in the board rooms, too much goodwill at the annual meetings of shareholders, would be a bore.

Just a quick link

Schulte Roth & Zabel, a law firm with offices in New York, Washington, and London, recently posted on its firm website an intriguing report on current trends in activist investing.

You can read the report for yourself here.

I'll say something about why I find it intriguing tomorrow.

Financial/political crisis in Belgium

The highest court in Belgium ruled Thursday, December 18, that the country's prime minister had exerted improper pressure on the judiciary in connection with the planned state-led break-up of the Fortis financial group.

Fortis is a Benelux fianncial powerhouse that came into being in 1990 when a large Dutch insurer (AMEV), and a Dutch retail banking group (VSB) both merged with a Belgian insurance company, AG.

It has made many strategic acquisitions since, and entered investment banking in 1996 with the purchase of MeesPierson NV.

That, and the rest of an acquisition binge lasting into 2007, left Fortis with a balance sheet heavy with debt. Then in June of this year the honchos at Fortis noticed that an international credit crunch was underway, and decided that their balance sheet needed some cleansing. They issued 200 million new shares of stock at a price of 10 euros each, and they cancelled this year's dividend, saving 1.5 billion euros.

The share price headed south -- because the new shares diluted the value of the old, and/or because the dividend cancellation diminished the whole.

By late September, a run-on-the-bank was underway. On Friday, September 26, 20 billion euros were withdrawn from Fortis accounts.

The company was partially nationalized by the three Benelux countries acting in concert the following Monday. Since they don't want to stay in the banking business. these governments appear desirous of selling Fortis to a French firm, BNP Paribas.

The courts of Belgium in particular have thrown a monkeywrench into the works, holding that the private investors have to have a say on the future of their company -- so the government(s) have to comply with normal procedures in terms of holding a shareholders' meeting before concluding the sale.

Those are the judicial proceedings with which the country's executive branch allegedly interfered, leading to a scandal and round of resignations last week.

Meanwhile, I understand that BNP Paribas is bow saying that time is/was of the essence of its deal to buy Fortis. Since this is all taking too much time, BNP may be pulling out, rendering the issue of a shareholder meeting rather moot.

So turns the world. Use it or lose it.

New boss at the SEC

Many of the announcements that have been coming from the camp of the President-elect in recent weeks have been designed to assure us that not too much will change.

They've made these announcements even at the expense of disillusioning their base. One example (IMHO a trivial one) involves the choice of Rick Warren to pray at the inaugural ceremony.

Another example, one that has a good deal more to d with the pulic welfare, as well as with the interests of this blog, than who does the ceremonial praying, is: who will head the Securities and Exchange Commission?

Subect to Senate approval, Obama's answer to that question is Mary Schapiro.

The world of Wall Street knows Ms Schapiro. They're comfortable with her. This seems to have been her chief recommendation for the president-elect. At the press conference announcing this pick, he read from her resume: Mary Schapiro currently serves as the chief executive officer of the Financial Industry Regulatory Authority, the largest regulator for all securities firms that do business with the United States. Before that, she served as an SEC commissioner, and as chairwoman of the Commodity Futures Trading Commission

FINRA, of course, isn't a "regulator" in the public-sector sense. It's a New York based brokerage industry self-regulatory body. ("Not that there's anything wrong with that," I say in Seinfeldian tones. My goal here is clarity we can believe in.)

Schapiro was an SEC commissioner for six years, a period that began while Ronald Reagan was in office, continued through the presidency of the elder Bush, and into that of Bill Clinton. Under Clinton, she moved to the CFTC, where she served from late 1994 until early 1996 -- about 15 months. She thereafter accepted a job with the self-regulatory arm of the NASD. That arm then merged (in the distant summer of 2007) with the self-reg folks at NYSE to become FINRA.

Somewhat amusing sidebar: the first plan was to name the merged entiity SIRA, for "Securities Industry Regulatory Authority." That name was abandoned for reasons havibg something to do with Danish cartoonists, i.e. it was deemed insensitive because of its similarity to an Arabic term describing the traditional biographies of the prophet Mohammed. FINRA was adopted as least likely to give any offense to anybody.

You can make of this what you will. Personally, I have to leave now to worship at the holy church of flyng spaghetti, where we study our finra texts carefully for signs of the apocalypse. And we're really offended by this appointment.

Three brief items

1. Microchip Technology says that it has plans to wage a proxy battle for control of Atmel, and has announced seven nominees for the board of directors.

Atmel, a company headquartered in San Jose, Calif., manufactures microcontrollers, advanced logic, mixed-signal, nonvolatile memory and radio frequency (RF) components.

Microchip made an unsolicited bid to acquire Atmel in late October and was rebuffed. This week's announcement is in response.

2. RA Capital Healthcare Fund, a hedge fund with a biotech focus, is urging the board of Northstar Neuroscience Inc. to make a cash distribution to its shareholders or to implement a share buy-back program.

Northstar, based in Seattle, Wash., makes medical devices, especially a system that delivers targeted electrical impulses, "cortical stimulation," to the brain for what the company's website describes as "investigatory purposes."

RA Capital's letter is mostly limited to "urging" a course of action. There is no real "or else" clause because RA seems to be aware that it isn't in much of a position to forcefully re-direct corporate policy.

3. Whatever you might want to say about Marc Dreier, the lawyer who was caught impersonating a pension plan official last week, you can't argue with his timing. If one is going to be caught in stupid high-level criminality, one should make sure that it is squeezed between Gov. Blago's arrest on the one side and the follies d'Madoff on the other.

For those who have forgotten Dreier and thus aren't sure what I'm talking about ... well, that's the point. And here's a reminder.

Rectifier Update

International Rectifier has set the date for its annual meeting.

I last wrote about IRF in September. Since that time, the price of the stock has dropped steadily, from the neighborhood of $20 to that of $12.

Yes, everybody else has been dropping during that priod, too, but not as severely. If we round out the period in which we're interested to an even three months, the math is easier (or, tobe frank, the Nasdaq site will do the work for me).

IRF has lost 44.9% of its value over three months. The Nasdaq 100 has lost 31.4% of its value. The DJIA has suffered comparatively little, -22.5%.

Anyway, the IRF has set the date: January 9, in Los Angeles, California.

I had thought, in September, that there would be a challenge slate. But it now appears that the challenge didn't materialize, that the two members of the board up for re-election are running unopposed.

On the other hand (the "good news" for fans of conflict), it does appear that the meeting will consider a proposal to de-classify the board.

Payment for order flow

There is an intermittent controversy among those whom manage stock exchanges, brokerage houses and related institutions -- and among those who regulate them -- about a practice known as "payment for order flow."

Back in January 2003, for example, the then-chairman of the Securities and Exchange Commission, Harvey Pitt, wrote to the heads of each of the five US exchanges where stock OPTIONS are listed, just to give them what one might call a heads up.

"Hey guys, we're looking at this issue down here in DC. I'm not saying nothing, I'm just sayin'." [Not his exact words].

The idea was that an exchange would pay a brokerage firm for routing an order to them rather than elsewhere -- the payment might be a penny per share.

The controversy arises because your broker is suppsoed to be working for you, the investor, trying to get you the best deal. If he can get you a better deal for certain options on exchange A than on exchange B, shouldn't he rout your order through exchange B? If a payment from exchange B persuades him to do otherwise, aren't they cheating you?

The same might well be asked also if you're trying to buy the underlying stocks, though Pitt's January 2003 letter involved options for reasons I won't get into today.

Likewise, the same questions might be asked when it is a market maker, rather than an exchange, that is paying to keep orders on some form of security or other flowing. From whomever the money is coming, the broker who receives that money may be putting itself into a conflicted situation vis-a-vis its client.

I'm thinking about such matters today because an investment manager named Bernard Madoff is all over the news this weekend, even putting the continuing controversy over the auto bail-out in the shade for the moment.

Prosecutors claim that Madoff told senior employees at his firm, a market maker, that his operations were "all just one big lie," and "a giant Ponzi scheme."

If there is anything to the charges, the ongoing scandal may further discredit the whole idea of anyone -- exchange or market maker -- paying for any kind of market flow. Because Madoff had been closely associated with the practice, and was in fact a public voice in its defense.

He once told a reporter from CNN who interviewed him on the subject (May 2000): "If your girlfriend goes to buy stockings at a supermarket, the racks that display those stockings are usually paid for by the company that manufactured the stockings. Order flow is an issue that attracted a lot of attention but is grossly overrated."

The analogy is borderline absurd. The stocking manufacturer isn't in a relationship of contractual privity with the shopper, so such issues don't normally arise.

Here's some further reading for the curious.

Anyway, when this is all sorted out we may think of the whole idea of payment for order flow as an important warning sign. For the mark of a pyramid schemer is an increasingly desperate desire to keep increasing order flow.

Votes are in at Grubb & Ellis

Grubb & Ellis, the real estate investment operation based in Santa Ana, California, now says that its stockholders voted (Dec. 3) to re-elect the three nominees on the incumbent board: Harold H. Greene, Devin I. Murphy and D. Fleet Wallace.

Accordingly, they rejected Tony Thompson and the other two members of his slate -- Harold Ellis Jr. and Stuart Tanz.

Wait, I just noticed something. Sometimes I'm slow. But, one of the members of the defeated dissenting slate has a family name that looks a lot like the name of the company.

Harold ELLIS Jr., versus the incumbents of Grubb & ELLIS.

Ah, yes, there's more than one foiled comeback saga here. I understood that Thompson, the leader of the dissident slate, was a former chairman of the company, trying to return to it after a (brief) period at Elba. But what I didn't realize until just now was that the Ellis on his slate is also the Ellis on the company door. He founded the company half a century ago.

Ah, corporate history. Ah, humanity.

Cioffi and Tannin trial date

I see from the wire services that the US district court, eastern district of New York, has set a trial date for two securities-fraud defendants who once worked for Bear Stearns: Ralph Cioffi and Matthew Tannin.

Jury selection begins September 28, 2009.

Cioffi and Tannin ran two hedge funds within Bear Stearns that made big bets on subprime mortgages. The quick collapse of these funds in the summer of 2007 was one of the first claps of thunder in the storm that continues to this day.

So are Cioffi and Tannin mere scapegoats? They were wrong about the subprime market and those who invested in their ability to be right consequently lost a lot of money. But their investors were grownups (and well heeled grown-ups too -- nobody got evicted from his/her garrett because Tannin and Cioffi lost the rent money).

Both men have pleaded not guilty.

One question you might ask yourself: why is this case going to trial in the eastern district of New York? That district consists of Long Island, Staten Island, the Queens, and Brooklyn. Didn't Tannin and Cioffi work in Manhattan? Manhattan, along ith the Bronx, constitutes the SOUTHERN DISTRICT of New York. Yes, they did.

And there have been times when the US Attorney for the southern district was the big cheese in such matters, the sheriff of Wall Street (that's how Rudi Giuliani first became a national figure after all, back in the 1980s).

Some commentators, like Peter Lattman have read the ED attorney's involvement as an incident in an ongoing rivalry between SDNY and EDNY.

Furthermore, the bill of indictment says little more about the reason for the involvement of the U.S. Attorney for the eastern district than this, beyond, "Some of the fund's investors resided within the eastern district of New York." There's surely more to it than that.

I'm hoping for an embarrassment for the prosecution. I hope Cioffi and Tannn's attorneys can make the ED guys wish they had left Wall Street alone. Leave it to the SD forever after, I imagine them telling one another when this is all done.

I'm sure I'll have more to say about this at some point in the nine months between now and trial.

Hain Celestial

Yes, some stockholders at some corporations are interested in pressing for the re-incorporation of the corporations out of Delaware and into North Dakota in order to get what they see as the advantages of the ND new-model corporate charter.

Among the few corporations where this issue has arisen so far is health-food concern Hain Celestial Group. Its best known for its Celestial Seasoning tea, it is headquartered in NYS and ... chartered in Delaware.

Here's a link for more.

The shareholders proposed a non-binding resolution on this subject in July. In October, Hain Celestial asked the SEC for permnission to ignore it on procedural grounds (via a no-action letter). They were denied. So it appears there will have to be a vote.

North Dakota

I don't know that this blog has ever been visited by anyone from North Dakota. But if you drop by in the future and see this message: Hail!

I understand that last year your state enacted a remarkable corporate-governance statute.

It creates a new chapter of the state's corporations law, 10-35, by which a company chartering in that state can opt to be governed. If it does, it will get a low franchise fee, only half of what it would pay if it incorporated in Delaware, but it will have to abide by various rules designed to keep the management responsive to the shareholders.

For example: the term of directors shall not exceed one year and will not be staggered into different classes. So every annual meeting will involve the re-election (or not) of the entire board.

The chairman of the board will be ineligible from holding any executive office. We've become accustomed to seeing the phrase "chairman and CEO" after a bigwig's name. The new 10-35 corporations will have two people for those two distinct posts.

Provision is made for access to the company's proxy materials by major shareholders -- provisions analogous to those recently considered, but never adopted, by the SEC.

Shareholders must approve of certain public issuances of shares: in other words, they can veto actions that would dilute their voting power.

There are other important provisions in 10-35, but those examples will give you an idea of the direction of the whole package.

What difference might this make? Are a lot of firms going to beat down the door to re-charter in North Dakota, either for the low franchise fee or because their shareholders are pressuring them to do so or for any other reason?

More on this tomorrow.

Tecumseh victory

Tecumseh Products Co. announced Friday that it has defeated a challenge by dissident shareholders led by the Herrick Foundation.

In a statement, the chairman and chief executive of the compressor manufacturer said: "We thank our shareholders for thoughtfully reviewing the voting alternatives and providing their support for our current board of directors and, by extension, for the strategic direction we have set."

Anyway, I did enjoy the opportunity this particular proxy contest gave me to learn a little bit about the different sorts of compressors. See my entries for Nov. 10th and 11th for the particulars.

Tecumseh's class B common stock (the class with voting rights) trades on Nasdaq under the ticker symbol TECUB. It's price reacted well Friday to the late-morning announcement of the incumbents' victory, rising from $8.23 a share to $8.79.

The Herrick Foundation issued a statement that sought to make lemonade out of the lemon-like result. The provocateurs there are encouraged by the supportive votes they did receive, and will continue to seek to protect Tecumseh shareholders' best interests, blah blah blah.

It's the usual post game locker-room stiff-upper-lip stuff.

Conflict of Interest

So what's the most dramatic piece of this puzzle in which I've been trying to interest you this week?

Why should we pay attention especially to the proxy fight over Grubb & Ellis at today's shareholders meeting?

It features a dandy conflict-of-interest charge.

The playbook sometimes calls for the incumbent management to say, "shareholders, please don't vote for the challengers. They, or some of them, or the leader of the gang, owns interests in other companies which have interests that compete with yours and our. If they take over this company, they'll end up running it for the benefit of those competing interests, at your expense."

The charge in this case, as made by the incumbents, is that "Anthony Thompson is attempting to take control of Grubb & Ellis and install Stuart Tanz as CEO with the intention to cause Grubb & Ellis to buy or absorb Thompson's newly formed company, Thompson National Properties, a direct competitor."

Thompson's answer is that the two companies aren't direct competitors. They're both real-estate related but that phrase covers a wide range of actual operations.

As Thompson describes TNP, it is more a customer of G&E than a competitor, having purchased 3 buildings from them in 2008.

What about the claim that Thompson wants G&E to purchase TNP?

Thompson and his slate scoff at this, too. Even if they win the election today, they'll have at most three seats out of the eight, so they couldn't push through such a decision by themselves.

Also, Thompson owns a 14% stake in G&E. So, he asks, why would he press actions that would undermine the value of that stake?

One could speculate about responses to such points. After all:

(1) customers are sometimes also the competitors of their suppliers.
(2) even a consistent customer-supplier relationship could generate conflicts of interest. Conceivably, TNP could want to buy G&E to so arrange things that it could thereafter pay lower commissions when it buys buildings [just a hypothetical off the top of my head folks -- in other words, I just made it up!] but
(3) Thompson could for all I know be angling to have G&E buy TNP at an inflated price regardless of what their relationship to each other has lately been -- and could reckon that his gain on one side of that deal would exceed his loss at the other, and
(4) A three vote block on an eight member board is a formidable one, especially if the other five aren't a cohesive block themselves.

And so forth. Round and round the mulberry bush we could go.

Let's wait and see who wins this one.

Charge and Reply

In the proxy dispute over Grubb & Ellis that I described in yesterday's entry, the dissident slate's filings make the following points:

1. Financial Performance has deteriorated over the last year. In the first three quarters of 2008, the company lost $55 million. In the same three quarters of 2007, it made a profit of 14.4 million.

2. Stock price has suffered. Mr. Thompson, leader of the dissidents, left the board in February 2008. Since then the stock has lost 82% of its value. Of course, all stocks have been down in that period, althoughthe dissidents contend Grubb & Ellis has underperformned its peers,

3. There's nobody at the helm. The CEO, Scott Peters, resigned four months ago. The board hasn't named any permanent replacement. The dissidents say, "In our view, Rome is burning and this is hardly the time for the Board to fiddle."

4. An alarming amount of turnover lately, both in management positions and in the company's brokerage division.


To such charges the company responds that althouygh times are turbulent, its results ARE in line with industry peers. It has eliminated more than 10% of its brokerage professional because they weren't meeting expetations, and it has attracted new blood to key managerial roles -- these facts are, in the incumbents' view, signs of strength not of weakness.

As to the CEO post, they say they're working on it. Or, in the relevant lingo: "The Board of Directors is undertaking a comprehensive search for a permanent CEO to lead the Company forward and to continue to execute on our strategic initiatives to the benefit of all stockholders." Don't taz me, bro.

There are more dramatic charges flying around, involving conflicts of interest. But I'll save them until tmorrow, which happens to be the day of the showdown, errr, meeting.

Grubb & Ellis

The shareholders of Grubb & Ellis, a major real-estate services company, meet Wednesday.

Elections to the board are staggered, so only three of the eight seats are in play this year.

Tony Thompson, the former company chairman, was ousted earlier inthe year but he remains the company's second largest shareholder (with 14%) and he wants back on the board.

The largest stake belongs to one of the directors who is not up for re-election this year, C. Michael Kojaian, who was 23%.

The largest institutional stake is in the hands of Wellington Management Co., Boston (7.5%),

The two other members of Mr. Thompson's challenge slate are Stuart Tanz and Harold Ellis. The three incumbents they're seeking to replace are: Harold H. Greene, Devin I. Murphy, and D. Fleet Wallace.

That's the score card. More about the state of play tomorrow.