Manipulating director elections by controlling whether there is a quorum

Crestview’s July 15 letter says there was no quorum at the June 30 annual meeting.  Only 46% of shares were present despite strong proxy gathering by at least two non-incumbents.  In 2021, when there were no non-incumbent candidates, the meeting was held on time with 56% attendance.  In 2020, when non-incumbent Alma Quesada ran a strong campaign, the meeting was delayed until November and only 46% of shares were present.  The 2019 meeting was held on time and 56% of shares were present.

So, in years when the election of directors was uncontested, Crestview had no trouble getting quorums and holding the meetings on time.  In years when there were insurgent candidates collecting hundreds of shares by proxies, the meetings were delayed beyond the deadline, and no quorum was present.  What explains that counterintuitive pattern?

We found that in the many years of quorums and on-time meetings, staff was on the phone in the last week to large shareholders asking them to turn in their proxies “so we can have a quorum.”  In the no-quorum and delayed-meeting years, staff apparently did not do that.  That works out nicely for directors who don’t want to risk losing an election, which may also be a reason meetings in those years were delayed for months.

The bylaws allow a meeting lacking a quorum to adjourn to a later date and proxy collection to continue so that a quorum can be rounded up for the reconvened meeting.  It was announced at the June 30 meeting that it would reconvene on July 28, but the deadline for collecting proxies was not extended.  At a reconvened meeting shareholders could vote to extend the proxy solicitation period, but our president, Sol Chooljian, has decided unilaterally that the meeting will never be reconvened.  In this way, his record of never allowing shareholders to elect a non-incumbent director remains unbroken.

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