NEW YORK, NY / ACCESSWIRE / July 19, 2022 / Earlier today Echo Lake Capital and Deerhaven Capital (collectively the "Authors") issued a letter to the Board of Directors of U.S. Global Investors, Inc. (NASDAQ:GROW) criticizing the company's CEO and controlling shareholder, Frank Holmes. The Authors condemn Holmes' apparent decision to hire his son on three separate occasions at GROW and not disclose it to shareholders. The Authors question if these actions violated securities laws and if these actions harmed the company's shareholders and other employees. The Authors believe Holmes' actions were unethical and not best business practices which seems ironic considering Holmes recently created the "Frank Holmes Centre For Leadership, Ethics & Entrepreneurship at Huron University."
The Authors have previously questioned if the Board is acting in the best interests of all shareholders and the disclosure about potential nepotism only heightens the Authors' concerns that the company is actually being run for the benefit of a select few individuals.
A full copy of the letter can be found below:
July 19, 2022
Frank E. Holmes
Thomas F. Lydon, Jr. - c/o VettaFi, Guggenheim Partners
Jerold H. Rubinstein
Roy D. Terracina - c/o The Najim Charitable Foundation
We believe that on three separate occasions Frank Holmes, the CEO and controlling shareholder of U.S. Global Investors, Inc. ("GROW" or the "Company"), hired his son as an employee of the Company and did not disclose it to shareholders. We believe these actions may have violated securities law. These actions also heighten our previously expressed concerns about how the company is being operated and in whose best interests the Board is acting.
The LinkedIn profile of Nigel Holmes, the son Frank Holmes, indicates that on three separate occasions Nigel was employed by GROW:
Date and Title
Feb. 2020 to Dec. 2021 - Investment Consultant
Aug. 2014 to Feb. 2015 - Investment Analyst
Aug. 2012 to Dec. 2013 - Investment Analyst
We can only wonder why GROW did not disclose Nigel's employment in filings with the Securities and Exchange Commission. We believe the Company may have had a legal as well as an ethical obligation to disclose that its CEO (and controlling shareholder) hired his son not once, not twice but three times.
In addition to the potential legal repercussions of failing to disclose related party transactions, we are troubled by how Frank's decision to hire his son might have impacted the Company's other employees and shareholders. GROW is a tiny company with few employees and we are worried that the CEO hiring his son likely harmed employee morale and productivity and therefore also harmed shareholders.
Most public company CEOs we know would never hire a family member at his/her company for fear that the taint of nepotism might harm the company and its shareholders. Apparently Frank does not have those concerns. Most CEOs we know are very conscientious about disclosing any Related Party Transactions to shareholders and the SEC….apparently Frank has more "relaxed" reporting standards.
We find it ironic that Frank Holmes has apparently on multiple occasions hired his son at a small public company without disclosing it to shareholders considering Frank recently established the Frank Holmes Centre For Leadership, Ethics & Entrepreneurship at Huron University. We do not believe Frank's hiring of his son (and not disclosing it) is ethical. We also do not believe his actions would be considered best practices by anyone truly interested in promoting leadership. However, we welcome the opportunity to debate Frank about this matter in front of the Huron student body.
Our previous letters to you highlighted some of our concerns about Frank's actions and whether the Board was acting in the best interests of shareholders. The revelations regarding Nigel's employment heighten our concerns that GROW is really being run for the benefit of a select few individuals rather than for the benefit of all shareholders.
Echo Lake Capital
SOURCE: Echo Lake Capital
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