U.S. charges proxy solicitation firm employees with fraud

By Ross Kerber

BOSTON (Reuters) – U.S. prosecutors on Tuesday announced criminal charges against five current and former employees of leading proxy solicitation firm Georgeson, accusing them of engaging in a fraudulent scheme to gain shareholder voting information with bribes such as two tickets worth $1,400 to a Boston Celtics basketball game.

The case paints a picture of senior executives scrambling to learn voting data to gain an edge in corporate elections. Winning backing from big funds is key for investors out to capture board seats or to limit executive pay, making a market for proxy solicitors such as Georgeson, which tracks shareholder votes and works for activists and stock issuers.

Prosecutors did not name Georgeson in their criminal complaint, which charged conspiracy to commit wire fraud and honest services wire fraud. It alleged the five people worked together to bribe an employee of a prominent proxy advisory firm, also not named.

A spokeswoman for Georgeson, a unit of Computershare Ltd that calls itself the largest proxy solicitor, said in an emailed statement that two of its current employees and three former employees were charged.

“When allegations in this case surfaced in 2012, Georgeson promptly and proactively contacted the SEC (the U.S. Securities and Exchange Commission) and since that time has cooperated fully with the investigation by the SEC and U.S. Attorney and will continue to do so,” the company said.

The filing states the bribes were paid to Brian Bennett, who has pleaded guilty in a separate criminal case. Bennett has been identified as a former employee of proxy adviser Institutional Shareholder Services.

Legitimate methods for proxy solicitors include polling big investors or checking their past views. But the Georgeson group became too aggressive, according to a Federal Bureau of Investigation agent’s affidavit filed by prosecutors in U.S. district court in Boston.

It lists several cases in which in exchange for tickets Bennett provided details on the voting by investors in big companies that had hired the proxy solicitor. It also states the group conspired to defraud clients of their own employer by billing them for some of the bribes, claiming they were legitimate.

One of the Georgeson group sought so many details that at one point Bennett wrote back, “Don’t even try to ask me for votes on all of these,” according to the document.

Charged were Donna Ackerly and Richard Gottcent, both listed as senior managing directors on Georgeson’s website. Also charged was Charles Garske, a former Georgeson employee now working for rival proxy solicitor Okapi Partners, and two others, Keith Haynes and Michael Sedlak.

Sedlak was fired by the proxy solicitor in 2012, and Haynes was fired last month, according to the court filing. None of the individuals or their attorneys responded directly to requests for comment.

Officials said four of the five were arrested Tuesday morning, and that the other, Garske, is expected to have an initial court appearance later this week.

(Reporting by Ross Kerber in Boston and Nate Raymond in New York; Editing by Tim McLaughlin and Steve Orlofsky)