Use access key #2 to skip to page content.

alstry (35.41)

SPF Lying, Cheating and Stealing?

Recs

13

March 08, 2008 – Comments (11)

Right now SPF has almost twice as many spec homes completed or under construction compared to backlog.  No other public HB comes close to % of spec homes UNDER CONTRUCTION to backlog.

Why would SPF be building so many specs when almost every other builder has publicly stated that they have pretty much stopped building specs?

Is it because SPF's management is doing just about anything they can to generate revenues (NOT PROFITS) try to siphon shareholders' and creditors' cash and assets into their own pockets?

Late last year management eliminated the shareholder's dividend.  The stated reason to save cash.  To save cash for what?  Simply to give management millions in CASH payments as a bonus early this year.  As a bonus for what?  For losing MORE money in a single year than this company has lost in its entire existence as a public company.

Now, management is trying to set itself up to get even bigger CASH payments.  They want millions and millions more.  They want cash payments equal to 150% of their already very generous salaries.  Here it is:

...the target bonus will be payable as follows: 40% based on the Company’s achievement of a targeted level of net new orders 1 , 30% based on the Company’s achievement
of a targeted inventory level 1 , and 30% based on the Company’s achievement of a targeted revenue level 2 . The target bonus will be adjusted up or down based on the extent to which actual performance exceeds or
falls short of the target 3 .

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125%2D08%2D050343%2Etxt&FilePath=%5C2008%5C03%5C07%5C&CoName=STANDARD+PACIFIC+CORP+%2FDE%2F&FormType=8%2DK&RcvdDate=3%2F7%2F2008&pdf=

Notice, not a single word regarding the "target" bonus relates to profitability.  Basically, are these guys are being incentivised to LOSE money so long as they generate enough revenues, deliver enough homes, and sell down enough inventory so MGT can get paid millions in bonuses? 

Something seriously wrong seems to be going on here folks.  What kind of independence exists on the board to allow this kind of clause?

Not only that, management KNOWS it publicly inflating the value of the assets relative to the current market value of the assets.  Why are they doing this?   So mgt can keep this charade going on as they line their pockets with money otherwise belonging to shareholders and creditors?

SPF management and board last Fall cut off the dividend to shareholders.  It is liquidating corporate assets at over 4X the rate it is paying off creditors.  They are liquidating those assets at HUGE losses.  A three legged mentally impaired donkey could lose money at a slower pace.  ALL THE WHILE management is lining its pockets with millions in cash......much of which generated from bonuses.....you gotta be kidding!!!!!!!!!!

SPF is now running out of assets fast.  Much of the little in assets that remain are not fairly valued on the books.  Those assets are the last remaining security for the BILLIONS AND BILLIONS in debt and belong to shareholders.  As SPF is liquidating itself to nothing, instead of forwarding that money to shareholders in the form of dividend, management is taking cash and giving it to themselves.

At the current pace, epecially considereing the inflated current asset values, pretty soon, this company will be liquidated to practically nothing.  There will not be much left for creditors and even less for shareholders.  All the while management keeps bonusing themselves stuffing shareholder's cash in their pockets as they quietly take money.

We are a nation built on ingenuity and hard work.  This kind of parasitic behavior must be stopped or such behavior could become accepted practice in our public companies.  It this spreads, the entire public equity system could be in jeopordy.....if we not already there now.

Is SPF current management going to rack up billions and billions in debt, lose billions and billions of shareholder's money, siphon and stuff millions and millions of cash into their pockets, and in the end leave shareholders and creditors holding the bag?  Is the above behavior lying, cheating, and stealing?  I leave that answer for you guys to respond to.............

 

11 Comments – Post Your Own

#1) On March 08, 2008 at 8:36 PM, joeykid13 wrote:

I am waiting for Floridabuilder's response to this.

Report this comment
#2) On March 08, 2008 at 11:10 PM, redfish9395 (< 20) wrote:

I noticed that Parnes did not negotiate payment of his legal fees as a part of his bonus plan.

Report this comment
#3) On March 09, 2008 at 1:00 AM, StockSpreadsheet (73.33) wrote:

Sadly, these actions are all too common in American management.  A lot of this is due to interlocking board rooms, (where the "you scratch my back and I'll scratch your's" mentality is alive and well), and shareholder apathy.  If the shareholders voted out some of these boards and voted against a lot of these bonus plans, then this activity would become less common.  Also sadly, often a majority of stock in these companies is held by mutual funds, investment banks and brokers, all of whom want special favors from management, (stock issuance or merger/takeover deals, inside information, etc.), and therefore is not about to vote against management lining their pockets or the board's willingness to allow this to happen.  This is one thing that investing in small caps can benefit you, they tend not to have a majority of their shares owned by institutions, so the little guy could actually have influence on the actions of the boards and of management.  Read those proxy statements, vote against bonus plans and vote against board members that authorize outrageous bonus programs.  Also, if you win the lottery, you might occasionally want to do a proxy fight against the most agregious violators of their fiduciary duty to shareholders to see if at least a few of them could have their feet held to the fire.

Craig 

Report this comment
#4) On March 09, 2008 at 1:45 AM, joeykid13 wrote:

Craig...There is a great, and moral responsibility for a board member.  The probelm is, If you feel that way, you have to LIE in order to get elected....and then REPRESENT YOUR SHAREHOLDERS!  If we are gonna change the world, then it is us, the shareholders who will start our own CIA to represent us, on the board of directors, that is WE will plant our own representatives...who represent the PEOPLE!

Report this comment
#5) On March 09, 2008 at 1:49 AM, alstry (35.41) wrote:

Craig,

It is interesting you make the distinction between small caps.  When I started out, I made my oringinal money in small caps.  As a matter of fact, I became very close friends with a few CEO's who are still very very close friends today.  Never would these guys have behaved anywhere remotely close to the behavior exhibited at SPF.

In my career, I have never seen a clause where an executive would be bonused more the more he lost shareholders money. How do you bonus an executive for simply selling product without addressing profitablility?  Heck, if he sold houses for a buck each, he would get most of his bonus.  Absolutely incomprehensible.

Not only that, the board is bonusing the idiotic CEO who was responsible for borrowing billions to speculate on land because he wanted to take the "easy" way out.  Prior to this guy becoming CEO, I belive Scarborough borrowed more money in a few years than all previous managements borrowed collectively since SPF went public years ago.  To add insult to shareholder injury, the 8K doesn't even spell out how many homes (the "target") must be sold....is it one, two or three for this jerk to get 150% of his salary?  Do you think the board gave any bonuses to the hundreds of people this management team fired for working hard trying to sell houses?

If I did not read it myself, I would have said such a clause was not possible in today's "enlightened times.".  Especially for a CEO and CFO ALREADY defendants in a class action suit alleging providing false guidance.

JoeyKid,

FloridaBuilder will have no respone to this post.  He can't without weakening his credibility.  The facts are clear and open for anyone to see.  These guys are so arrogant, they simply don't care what anyone thinks.  Especially a bunch of idiots on a CAPS blog.  This management team thinks it is above the law, above the SEC, and certainly above its shareholders.  I know how management at publicly traded companies think.  They think no one will ever hold them accountable.  SPF management has made sure it receives Alstry's worst management of the year award.

The question you should ask yourself is how does the Wall Street analysts COLLECTIVELY let mangement get away with this kind of nonsense.  It is absolutely insane, especially if they want people to maintain accounts at their firms.

America is heading down a very very slippery slope.  Let's hope we don't fall down too hard.

Report this comment
#6) On March 09, 2008 at 10:33 AM, EScroogeJr (< 20) wrote:

In hindsight, a decision to speculate on land looks very stupid when the speculation failes, and the same decision looks very intelligent when the speculation succeeds. The "good" builders like MDC were doing exactly the same thing, they just got off the train a year earlier than SPF.

Report this comment
#7) On March 09, 2008 at 2:52 PM, alstry (35.41) wrote:

It is not the speculation that is the issue.  It is lying about the consequences of the speculative behavior that creates the problem.

Right now, SPF does not have enough assets to pay off its creditors.  SPF's management is inflating the value of land on the books compared to current market value.  

The company is simply liquidating inventory at HUGE losses and taking cash that rightfully belongs to creditors and shareholders and stuffing it in management's pockets. 

Any idiot can liquidate at huge losses.  Liqudating a business is not operating a business.  To reward yourselves for evaporating shareholders and creditors assets is taking deceptive behavior to a whole level of eggregious conduct.

The only question now is how long will the bankers and trustees for the bondholders permit this charade to continue?

Report this comment
#8) On March 09, 2008 at 4:31 PM, DemonDoug (79.11) wrote:

alstry, i wonder if there is some auditing or sarbox shenanigans going on.  wouldn't be surprised to see some of these guys behind bars at some point, and you're right, it's very obvious, you wonder when the banks are going to say enough is enough.

Report this comment
#9) On March 09, 2008 at 9:05 PM, alstry (35.41) wrote:

Thanks, buddy.

I wrote my newest post before reading your response.

I will use it right now for support in the comments.

Report this comment
#10) On March 09, 2008 at 9:19 PM, jesusfreakinco (28.79) wrote:

Alstry,

 Good to see you posting.  Looking forward to following your picks.  Good luck!

Report this comment
#11) On March 09, 2008 at 9:26 PM, jesusfreakinco (28.79) wrote:

Alstry,

 Did you see this article:

 http://www.bizjournals.com/sacramento/stories/2008/03/10/story1.html?b=1205121600%5E1602247

 Supports your dumping at a huge loss thesis.

JF 

Report this comment

Featured Broker Partners


Advertisement