Ex-Presstek execs received $2.1m for partial service in ‘07
At the end of 2007, Presstek still did not maintain effective control over its financial reporting, and it faced a Securities and Exchange Commission investigation that could levy fines so large that its insurance could not cover them, according to the company’s delayed annual filing with the SEC.
But – thanks to severance and equity compensation terms — the four executives replaced last year in the wake of company’s accounting mess received a total of $2.1 million for their partial service in 2007, about $900,000 more than they received when they worked a full year in 2006. Altogether, the four received $1.3 million in “termination payments and benefits.”
The good news is that, after the Hudson-based provider of printing equipment filed the required annual report – known as a 10-K – on April 30, the company’s stock price increased by almost 10 percent.
Delays in the filing and the last third-quarter filing prompted delisting warnings from the Nasdaq exchange, both of which have been rendered moot.
As of May 5, three days before the SEC filing deadline, the company has yet to announce its plans for releasing its first-quarter results for 2008.
The company’s new leadership, who launched an internal audit of the company’s accounting practices that has led to the filing delays, were paid substantially more than their predecessors, thanks to various equity compensation awarded as a signing bonus.
Jeff Jacobson, the chief executive, was compensated a total of $3.3 million during the last seven months of the year, and Jeffery Cook, the chief financial officer who started last February, made $652,573 in 2007.
The former executives include: Ed Marino, president and chief executive until May 2007, who received compensation of $938,693, compared to $566,885 in 2006; Moosa Moosa, the company’s CFO until February 2007, who received $481,508, compared to $278,087 in 2006; Peter Bouchard, former vice president of international business development, who left in December 2007 with $469,527 in compensation, more than double his compensation in 2006; and Quentin Baum, managing director-Europe until August 2007, who pulled in $211,529, which was actually less than $261,008 he made the previous year.
All of the former executives had “change of control” agreements with the company. Marino, for instance, was to receive not less than 18 months severance in the event of an involuntary termination, other than “for cause,” which is usually defined as a conviction, a theft, breach of fiduciary duty involving personal profit or some sustained conduct that hurts the company’s reputation.
Moosa and Bouchard received a year’s severance, and Baum only got two months under their agreements, the company said.
The SEC investigation concerns preliminary reporting for the third quarter of 2006, when all of the former executives were in place. That also is the focal point of a class action lawsuit against the company by stockholders.
Presstek said that the lawsuit is baseless and that it was cooperating with the SEC investigation, but warned that “these matters will result in a significant judgment or penalty assessed against the company for which there is inadequate insurance coverage.”
The accounting concerns have to do with inventory and revenue recognition controls and were primarily centered in Europe. The company’s remediation plan included the appointment of a new CFO and a new European finance director as well as additional training supervision in Europe. Still, according to a statement by the company’s accounting firm KPMG, at the end of the year, “Presstek has not maintained effective internal control over financial reporting.”
In addition to accounting plans, the company hopes to cut costs as part of its business improvement program. The company has reduced the number of its employees to 712 worldwide, but its Hudson facility has actually seen an increase, thanks to the consolidation of the company’s Canadian and Illinois activities to New Hampshire.
All this led to initial restructuring charges of $2.7 million in 2007.
The company also incurred various legal expenses – aside from the SEC and class action requirements – having to protect its intellectual property claims. A three-year lawsuit filed against Creo, which was subsequently acquired by Kodak, is scheduled to be heard this fall in U.S. District Court in Concord. Presstek is still awaiting a determination of a suit against Fuji Photo Film. It lost a case in the International Centre for Dispute Resolution against Reda National Company, a former distributor in the Middle East, that is claiming $9.7 million in damages, but the final award has yet to be determined. And this year, the company filed a complaint with the International Trade Commission and a lawsuit in Germany against VIM Technologies.
The company has paid Amster, Rothstein & Ebenstein, an intellectual property law firm, a total of $4.1 million in the past three years, including $1.1 million in 2007. Board member Daniel S. Ebenstein, a partner in the firm, also was compensated $100,000 for his service on the board last year. All told, the board received $1.4 million in compensation, with Chairman John W. Dreyer receiving about half of that: $752,676.