In a video posted on YouTube, a confident Barry Minkow, co-founder of the Fraud Discovery Institute, charged Microsemi Corp. (NASDAQ: MCSS) President and CEO and STEC Inc. (NASDAQ: STEC) Board Member James J. Peterson with "stock fraud."
Minkow said that Peterson knowingly "lied" in a Microsemi press release, when Peterson "categorically" denied Minkow's background report last week that he falsified his academic credentials in reports filed with the Securities and Exchange Commission. Minkow said that Peterson "knew it was a lie. He did it to salvage the stock price."
Minkow held in his hand a "Verification of Enrollment" that contained Peterson's birthday (information redacted), social security number (information redacted), and student identification number that was signed by the Brigham Young Registrar. The new document verified Minkow's background report that showed Peterson had falsified his academic credentials, stating there were "No degrees awarded at BYU as of December 9, 2008," to Peterson.
On December 3, 2008, Barry Minkow released a background report of Microsemi Chief Executive Officer and STEC Board Member James Peterson, showing that Peterson did not receive a "B.A. in business administration and an M.B.A. from Brigham Young University," as claimed in STEC's proxy filing with the SEC.
In response to Minkow's report, Microsemi issued a press release that same day stating:
I am working directly with the University to clarify this situation,'' Peterson said. "It appears that the background check there may have mistakenly been made with the name 'James J. Patterson,' not mine, as stated in a Seeking Alpha report.''
Peterson further questions the reliability of tipster Barry Minkow, a convicted felon who spent seven years in prison for fraud, as the source for the reports. Minkow uses his tips as a means to profit from "put options'' he buys on companies he researches. He uses a disclaimer on the factual accuracy of his reports.
"I have every reason to expect that Brigham Young will investigate this allegation shortly and officially confirm my degrees,'' Peterson said.
Minkow publicly discloses on his web site, to the media, and law enforcement agencies that he legally purchases put options before he issues his reports to bet a company's stock will decline after such reports are issued.
In addition, Peterson probably read my blog posted, earlier that day, which was also syndicated on Seeking Alpha. While I correctly spelled his last name several times, I misspelled his last name once in a paragraph towards the end of that post.
However, the background check by Minkow was done under the name "James J. Peterson" and not "James J. Patterson," as suggested by Peterson. The birthday and social security number (redacted from the report) is clearly Peterson's and does not belong to anyone else.
Minkow's report that Peterson falsified his academic credentials was verified by a Brigham Young University spokesperson before it was released and reported in Bloomberg News and the Wall Street Journal. After, Peterson categorically denied Minkow's report, a Brigham Young spokesperson reaffirmed to Bloomberg News that Peterson did not obtain any degrees from the school.
On December 5, 2008, Microsemi issued another press release in support of its embattled President and CEO James J. Peterson. See below:
Microsemi Corporation (NasdaqGS: MSCC - News) announced today that its Governance Committee of its Board of Directors is currently reviewing the status of the academic credentials of its President and Chief Executive Officer, James J. Peterson, and intends to work to resolve such status. Microsemi Board Chairman Dennis Leibel emphasized that Mr. Peterson has the full support of the Board and there are no plans to alter his role as President and Chief Executive Officer of Microsemi. "I want to assure our shareholders that Jim's educational credentials in no way reflect on the strength of Microsemi, which has been an industry leader. The Board's continuing support of Jim Peterson re-affirms our backing of his strategies, operational excellence and proven executive leadership,'' he said.
Note: Bold print and italics added by me.
In his YouTube video, Minkow responded, "We decided to help the board of Microsemi" investigate the status of Peterson's academic credentials. He said:
We will post the document from the school on our web site, so maybe the Board of Microsemi will not have to work too hard to conclude their investigation that their CEO lied and put it on the wire.
The press release hinted that even if Peterson falsified his educational background, as reported by Minkow and reasserted by Brigham Young University, Peterson is still assured his job at the company.
Apparently, Board Chairman Dennis Leibel is trying to hedge the company's position, just in case Peterson cannot substantiate his educational credentials by saying, "I want to assure our shareholders that Jim's educational credentials in no way reflect on the strength of Microsemi...." In others words, he is implying that it is OK for the President and CEO of a public company to lie in SEC filings about his educational background and in a subsequent press release by denying that he lied in SEC filings.
With Barry Minkow's latest document from Brigham Young University, Microsemi Board President and CEO James J. Peterson faces increasing pressure to resign and the company's Board of Directors faces pressure to fire Peterson, absent his resignation. Meanwhile, Minkow has contacted the SEC and the FBI and forwarded his reports to them.
Minkow's YouTube Video is below:
Last week, Broadcom (NASDAQ: BRCM) fired Senior Vice President Vahid Manian and a day later Manian resigned from the Board of Directors of STEC, after Minkow issued a similar background report showing that Manian lied about receiving a “B.S.E.E and an M.B.A from the University of California, Irvine” as claimed in a Broadcom proxy filing and an STEC proxy filing with the SEC.
Vahid Manian and James Peterson are long-time friends dating back to when Peterson hired him at Silicon Valley in the mid-1990s. They both served on STEC's board of directors and were members of that company's audit, compensation, and nominating committees, before Manian resigned from the board. STEC faces the grim prospect of losing two of its six board members and two of four members of its audit, compensation, and nominating committees.
Sam E. Antar (former Crazy Eddie CFO and a convicted felon)
Other blog posts of interest:
I am not short or long any of the companies named in this blog post. However, the Fraud Discovery Institute and/or Barry Minkow may have a short position in the companies mentioned in this blog post. Please read the Full Disclaimer on FDI for Profit Status from Minkow's web site.
Over a year ago, I provided funds to Fraud Discovery Institute (FDI) to help pay costs of its investigations, though I had no control over any monies spent. I am not an owner, manager, employee, or consultant of Minkow or FDI and I have not received any compensation from them.