board of directors committed the most egregious act of shareholder fleecing I've ever come across. My mouth is agape, in bewilderment, as I type this:
Chief executive officer Bill Carter was awarded a five percent bonus totaling $1.1 million based on the net proceeds resulting from Hemispherx's sale of 30 million shares of company stock through an At-The-Market (ATM) financing arrangement last fall.
Hemispherx's board concluded the sale of company stock on the open market -- something publicly traded companies do routinely -- actually represented a sale of "company assets not in the ordinary course of its business." Under this definition, Carter was contractually eligible to receive five percent of the proceeds.
The sale of 30 million shares of Hemispherx stock during the fourth quarter 2012 netted $23 million for the company. Of that, Hemispherx's directors wrote a check to Carter for $1.1 million.
Thomas Equels, Hemispherx's vice chairman and lawyer, also received the same $1.1 million "ATM bonus" under his employment contract. The bonuses and the reasons for granting them were disclosed in Hemispherx's most recent 10-K filed with the SEC.
So, 10 percent of the cash raised by Hemispherx late last year didn't flow into the company's coffers, but ended up instead in the personal bank accounts of two of its top executives. And this was all legal because Hemispherx's board of directors voted for it.
Hemispherx was selling those 30 million shares under the subterfuge of its ATM agreement which allows the company to disclose sales only when it files quarterly reports to the SEC. And of course, at that same time, Hemispherx shares were losing 80 percent of their value after the FDA and an independent advisory panel sharply criticized the company for the way it conducted clinical trials of the experimental chronic fatigue syndrome drug Ampligen.
The panel voted not to recommend Ampligen for approval and the FDA rejected the drug -- the second time Hemispherx has been turned away by U.S. regulators.
But despite Ampligen's abject failure and Hemispherx's stock price in the gutter, the company's sycophantic board deemed Carter and his crony Equels deserving of $1.1 million bonus checks based on a highly dilutive and undercover sale of stock.
but this shareholder-fleecing bonus deal just stinks.
For the record, here are the names and credentials of the independent directors sitting on Hemispherx's board:
Richard Piani, principal delegate for Industry to the City of Science and Industry, Paris, France; William Mitchell, professor of pathology at the Vanderbilt University School of Medicine; and Iraj Kiani, a citizen of the U.S. and England who resides in Newport Beach, Calif.
Well done, guys.
Oh, more more thing. Carter's total compensation package in 2012, the year in which he failed again to win Ampligen's approval or do anything positive for the company and its shareholders: $2.83 million.
-- Reported by Adam Feuerstein in Boston.
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;
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