Thompson, on the other hand, has a recent track record marred by losses for the Bruin Fund, TNP 6700 Santa Monica and its troubled note programs (TNP 12% Notes Program, TNP 2008 Participated Notes Program and TNP Profit Participation Program, LLC), which have generated investor's lawsuits.
Thompson Claim: Thompson claims that $1 million of fees paid to a prior auditor could have been avoided if the Special Committee had fired them when recommended by Thompson.
Strategic Response: Thompson did recommend terminating auditors in the third quarter of 2012, right after the auditor had found that Thompson had taken fees that not yet been earned. The auditor informed the Company that this was a significant deficiency in its internal controls and that the auditor would no longer rely upon the representations of Mr. Thompson as Company CEO. Total fees to the auditor of $1 million could not have been avoided as Thompson states because the total paid to the auditor was about $700,000 and a portion of that was earned before Thompson recommended terminating the auditor.
The Independent directors rightfully did not terminate the auditors mid-year after they found Thompson taking fees before they were earned.
Thompson Claim: Thompson claims excess travel including private air charter by the Independent Directors and Glenborough.
Strategic Response: All travel expenses by Independent Directors and Glenborough have been reasonable and customary and there has been no private air charter. Thompson did seek reimbursement from the Company in the past for jet fuel for a jet that was owned or leased by Thompson affiliates.
Thompson Claim: Thompson complains that the level of dividends paid to investors is unfair.
Strategic Response: The KeyBank Loan documents, negotiated by Thompson, prohibit the payment of dividends while the Company is in default under the loan. That default occurred in the 4th quarter of 2012, while Thompson was in control of the REIT, and was at least in part due to Thompson's pursuit of the Lahaina acquisition. The Independent Directors had no choice but to suspend the dividend during the KeyBank loan default in order to avoid a foreclosure of those assets. The Company is working to cure those defaults, and as stated in our August 12, 2013 press release, we know that dividends are important to investors and are working towards a goal of resuming the payment of dividends.
Thompson Claim: Glenborough's asset management fees are likely to be higher than Thompson's asset management fee.
Strategic Response: The total fees to Glenborough are lower than the Thompson's costs and fees by a substantial margin.
•Applying the new fee structure to the 2012 actual results could have saved the Company $2,300,000 without considering equity selling costs. •Property management fees are reduced by 20% from 5% to 4% of rents. •The asset management fee is 60 basis points of total assets and replaces both Thompson's asset management fee and reimbursement of overhead and staff accounting costs. •The fixed asset management fee with no overhead reimbursements is a much better structure for the Company as the cost is quantifiable and will alleviate disputes over the amount and the nature of reimbursements which disputes were common when Thompson served as advisor. •Acquisition fees reduced from up to 2.5% to 1%.
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