THE FLIGHT FOR COMPUTER ASSOCIATES
Forum Leader Seeks CA Info
By Mark Harrington
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
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
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
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
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
Nonetheless, Lutin says the relationship between CA management and Haefner
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
"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."
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