Milwaukee-based ARI Network Services Inc. today accused activist shareholder Park City Capital LLC of “character assassination” and called its accusations about one of its directors “baseless” in the latest blow of a weeklong proxy fight.
The Dallas-based private investment firm, which owns 1 million ARI shares, has nominated two of its own directors, which it hopes will be elected to ARI’s board at the company’s Jan. 5 annual meeting. In SEC filings this week, Park City has opposed ARI board’s director nominations, William Mortimore and Robert Newell IV. It describes Mortimore as having a “troubling track record” because a company that he founded was charged by the SEC with a “massive multi-year accounting fraud.”
In today’s letter to shareholders, filed with the SEC, ARI says it refuses to engage in a mudslinging contest with Park City.
“Park City has immediately reduced itself to a strategy of character assassination, misleading half-truths and manipulation of facts,” the filing says. “We consider Park City’s allegations and statements in the release to be little more than a distraction, and they do nothing to support their own candidates or refute ARI’s strong performance record.”
Mortimore founded medical software developer Merge Healthcare Inc. in 1987 and served as its president, chief executive officer and then chairman and chief strategist until 2006.
After beginning its investigation in 2006, a 2009 SEC complaint charged Merge with record-keeping violations and charged two of its former executives, Richard Linden and Scott Veech, with accounting fraud.
“…after an extremely thorough and exhaustive investigation of the events in question, the SEC affirmatively notified Mr. Mortimore that he would not be the subject of any enforcement action or ongoing investigation, effectively exonerating him from any allegation of wrongdoing in the matter,” ARI said in today’s letter.
ARI reiterated today that Mortimore has its board’s full support and confidence.
Park City has nominated John M. Mueller and Michael J. Fox as director candidates, and has sent a letter to shareholders urging them to vote for the pair, instead of for the board’s nominees. The investment firm has indicated it would like ARI to sell the company or go private in an effort to accelerate its growth and investor returns.
ARI recorded net income of $458,000, or 3 cents per diluted share, in its fiscal fourth quarter, up from $368,000, or 2 cents per diluted share, in the fourth quarter of 2015. The company provides sales software and marketing tools for dealers, distributors and manufacturers.