A letter dated February 16, 2015, from a portfolio manager for Clinton Group, states that executives under Rollins made extensive use of luxury sports cars and private aircraft. Clinton Group has developed a partnership with Campus Evolution Villages (CEV) in an effort to reshuffle the management team and get Campus Crest on a profitable path.
The wild spending under Rollins came as his ex wife, Sherry Carroll Rollins, and their two daughters were forced to periodically live off food stamps in Birmingham. That's because of a grossly unlawful divorce decree issued in Shelby County by Circuit Judge Al Crowson. The judgment was wildly one-sided in Ted Rollins' favor, especially when you consider that Sherry Rollins initiated divorce proceedings in Greenville, South Carolina, where the family lived--meaning jurisdiction was established there, and the case could not lawfully be heard in Alabama.
On top of his personal ties to Alabama, Rollins has strong business connections to the state. His corporate law firm is Birmingham-based Bradley Arant, and Campus Crest developed student-housing properties at four state universities (South Alabama, Troy, Auburn, and Jacksonville State). A project at the University of Alabama was canceled when Rollins was ousted last November.
Recent articles in the business press use terms like "blunders" and "loss of credibility" to describe Rollins' performance. But the issues were much uglier than that.
As Rollins convinced Wall Street to heap more than $800 million on his company, we were reporting about his conviction for assault in the brutal 1995 beating of his stepson in Franklin County, North Carolina. (See documents at the end of this post.) We also reported that Rollins had been the subject of a social-services investigation, based on a citizen complaint in North Carolina about possible sexual abuse of the same stepson.
Wall Street was well aware of the messiness in Rollins' personal life. Paula Poskon, an analyst with Robert W. Baird and Company, learned in October 2012 about Rollins' criminal record and the child sexual-abuse allegations. Poskon's reaction to this news? "Oh, my God, I was not aware of any of that. . . . It certainly sounds like I need to do a lot more digging."
Did Poskon do more digging? Apparently not. A few months later, she tried to strong arm me into retracting her statements about Ted Rollins.
It's unclear if Clinton Group knows, or cares, about the ugliness in Ted Rollins' past. But the investment group clearly is unhappy with the way Rollins conducted his business affairs. From the aforementioned letter, written by senior portfolio manager Joseph A. De Perio:
In forthcoming proxy materials, we will expound in great detail on all the missteps of the Company overseen by the Board of Directors. And we will expose what we see as a lack of leadership and strategy both in the executive suite and at the Board of Directors itself, severely lacking management and board governance and approval processes (as evidenced by questionable site selection and construction practices), weak operating procedures, all of which (and much more) has led to operating results that fall well behind the Company's peers.
The Board of Directors, the majority of which has been in place since the IPO in October 2010 has overseen shareholder value destruction of 43% since the IPO. All the while, the Board has lavished the Company's executives with luxury sports cars (the Maserati and the Tesla are the ones we know about) and excessive use of private aircraft from a related party. In addition, we will raise questions about the other related party insurance transactions between Fortegra and CCG, the low stock ownership of the Board, and lavish corporate spending.
That's tough talk, and De Perio was just getting warmed up. He and his partners clearly plan to take the company in a new direction, one way or another:
We are sending this letter to the incumbent Board of Directors now as we believe a costly and distracting proxy contest should be avoided for the benefit of Campus Crest's shareholders. In our last two proxy contests in which we sought and prevailed in replacing a majority of directors, Stillwater Mining, Inc. and EVINE Live, Inc. (fka ValueVision Media, Inc.), management and incumbent directors spent $4.3 million and $3.5 million, respectively, on defensive and entrenchment endeavors. Our expenditures were a fraction of those amounts, as we were spending our own money and not the shareholders', and the proxy contests ended in decisive votes in favor of Clinton Group's nominees.
We are available if the incumbent Board of Directors would like to have a meaningful discussion, but we continue to ready our proxy materials and shareholder communications. We plan to encourage other shareholders to contact us to find out more about the details of our plans and the expertise of the players involved and will further encourage them to speak their minds to the Company's existing leadership.
We've shown that Ted Rollins tends to create messes in his personal life--the documents below are proof of that. Now we know that he also creates messes in his business life.
It looks like Clinton Group is determined to clean this mess up.