Forum Leader Seeks CA Info

By Mark Harrington
STAFF WRITER

August 14, 2001

Records of meetings and other communication between executives at Computer Associates International Inc. and Swiss billionaire Walter Haefner are being sought by an investment banker who leads a "non-partisan" forum for investors and analysts following the proxy fight for control of CA.

Gary Lutin, who has led similar forums for the New York Society of Security Analysts since 1999, said his aim in seeking the information is to determine whether there are any undisclosed arrangements between CA and Haefner that guarantee his support in the battle for control of the Islandia software company.

Nearly 100 sell-side security analysts, governance experts and portfolio managers with holdings of CA shares are on the distribution list for the CA Shareholders Forum headed by Lutin, who said he doesn't own any CA shares himself.

Since the analysts society dropped the forums this summer, Lutin has carried on independently, and asked both sides in the proxy context, CA and investor Sam Wyly, to provide information and financial support for the forum. Thus far, Wyly's side has agreed, paying $75,000.

Lutin made a name for himself after a previous forum on Amazon.com led the online retailer to change its financial reporting disclosures. CA has declined to participate in the forum, saying it believes its own methods of addressing shareholders have been effective.

Of particular concern to Lutin is a provision in CA's shareholder rights agreement that allows CA's board to enact its poison pill defense against hostile takeovers should the board determine a shareholder is an "adverse person." Poison pills provide for distribution of additional shares to all but the person deemed adverse to company interests, thereby diluting the hostile position.

Lutin, in several letters sent to CA and its board, said the concern is that CA's board could declare Haefner an adverse person and dilute his 123 million CA shares, which represent 21 percent of the company.

Lutin is urging the CA board to "eliminate the question" by approving a resolution saying the company won't enact the poison pill should Haefner vote against management.

Haefner is a pivotal supporter of CA in an effort to replace the company's board of directors by Wyly and his Ranger Governance Ltd.

"Shareholders need to know whether Mr. Haefner is free to support anyone he wants with his 21-percent block of CA stock, or whether he would risk triggering CA's poison pill if he supported a dissident," Lutin wrote CA on Friday.

In a response Friday, CA told Lutin that Haefner can't be declared an "adverse person" because of a stipulation in the rights agreement that such an entity would have to acquire 15 percent or more of the company after June 18, 1991. Haefner acquired his position well in advance of that date.

Maria Carmen Pinnell, staff attorney at the Investor Responsibility Research Center, a Washington, D.C.-based corporate governance research firm, said her review of CA's poison pill provisions was that Haefner could "theoretically" be declared an adverse person, but such a provision is standard and even prudent on CA's part.

"It doesn't exempt Haefner, but that's not strange," she said. "If it had, CA would be captive to Haefner." What's more, she said, "there are no real facts to indicate that Haefner is a captive person [made to support CA against his will]. He's voted with management for years and supported them."

Nonetheless, Lutin says the relationship between CA management and Haefner is troubling.

In an earlier letter to CA senior counsel Steven Woghin, Lutin asked CA to provide "records of communications with Mr. Haefner and his affiliates concerning competing candidates for the company's board of directors and Haefner's commitment to support the management nominees."

Dated Aug. 6, the letter also seeks "descriptions of the purpose and contents of any verbal or written private reports to Mr. Haefner or his affiliates during the past year."

Lutin said full disclosure about management's meetings with Haefner is important because it may reveal "agreements that restrict application of the poison pill" with regard to Haefner's shares.

But CA spokesman Owen Blicksilver said the company has no responsibility to supply such information, noting, "He [Haefner] can vote for whomever he wants without triggering the plan."

In a reply to Lutin's letter, CA said the requested information is "neither of a public nature nor ... the type of information that would be disclosed in the ordinary course of the company's business."

Blicksilver called Lutin's requests "a fishing expedition," adding, they are "nothing a company would disclose. Any meeting with a shareholder is proprietary." Further, Blicksilver questioned Lutin's claim to being non-partisan.

"It's hard to say he's totally impartial in terms of his loyalty given that he's receiving a retainer from Wyly," Blicksilver said.

He acknowledged that Lutin approached CA to participate in the forum, but said the company declined because "we believe we are effectively reaching shareholders through meetings, letters and direct discussions without the need of an intermediary."