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Voce Capital labels Argo expenses response as “selective” and “hair-splitting”

24th April 2019 - Author: Luke Gallin

Voce Capital Management has addressed Argo Group’s response to accusations it misused corporate assets, labelling provided explanations “selective” and “hair-splitting”.

Argo Group logoThe war of words between Argo and Voce Capital, which has a 5.6% share in Argo, started in February 2019, when Voce accused Argo’s Chief Executive Officer (CEO), Mark E. Watson III of perpetuating “shockingly high and shockingly inappropriate” corporate expenses over the past ten years.

Argo’s response claimed that Voce had ignored the re/insurer’s solid track record of strong value creation for shareholders. Following this, Voce put forward five independent candidates for Argo’s Board of Directors, which led to recommendations issued to Argo shareholders by the Board urging them not to endorse or vote in favour of any Voce Proposal or Voce Nominee.

Now, Voce has responded to what it calls “Argo’s attempted justifications for misuse of corporate assets,” accusing the firm of “selective and hair-splitting explanations”, which “demonstrate deeply rooted culture of excess and obfuscation.”

“It’s not surprising to us that Argo’s recently-issued letter to shareholders is replete with selective and misleading attempts to explain away the multitude of issues that Voce has raised with respect to the Company’s excessive expenses and misuse of corporate assets. After a careful review of Argo’s materials, we believe that its responses raise yet more questions – questions to which shareholders deserve honest and complete answers,” says Voce.

Specifically, Voce highlights five responses from Argo that it deems especially deficient. This includes the company’s stock price, which, Voce questions whether the fact its stock price is merely rising in tandem with its peers, justifies the misuse of corporate assets for personal use by its CEO.

One such asset Voce is questioning is the second deficient response underlined, and concerns Argo’s corporate housing program.

“New York City, Bermuda, Miami . . . these are just the corporate residences we have discovered so far.  Where else does Argo own similar properties? Argo fails to disclose in any of its public filings the locations of its many owned and leased property locations around the world, and it’s obvious to us why it has chosen to try to conceal them,” says Voce.

Thirdly, Voce questions the percentage of flights on corporate aircraft that were used to transport the CEO for personal reasons. Voce says it has identified three Argo corporate jets, and through research claims that it has identified a number of “highly questionable dates and destinations to sybaritic destinations and locales with no Argo offices.”

In fact, Voce claims it has made available the complete flight logs for Argo’s jets since November 2016.

Argo sponsors numerous events around the world, and regarding this, Voce has questioned why it fails to disclose the exact amounts it spends on various sponsorships, in order for shareholders to be able to “assess whether they constitute a “modest cost” as the company claims.”

Finally, “On what basis did Argo’s Board conclude, when it unilaterally appointed Messrs. Liss and Latham, that it could circumvent the requirement in the Bye-laws that only shareholders can fill Board vacancies?” questions Voce.

Voce says that it will soon release a detailed plan to improve Argo’s return on equity (RoE) and unlock substantial shareholder value.

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