Mount Kellett Out of Control

For background on the continuing saga of Mount Kellett Capital Management:

http://janbtucker.com/blog/2012/04/06/will-mount-kellett-ever-learn/

http://janbtucker.com/blog/2012/03/23/what-is-mount-kellett-thinking/

http://janbtucker.com/blog/2012/03/20/mount-kelletts-war-on-workers/

http://janbtucker.com/blog/2012/03/16/romneyizing-los-angeles/

A Battle Won, the War Continues

Big news in our fight with Mount Kellett: a week ago, on April 3, 2012, the proxy battle between Mount Kellett’s usurpers and Baja Mining’s existing management came to a head when Mount Kellett lost 51% to 49% in its quest to throw out two existing Baja Mining directors and elect two of it’s own flunkies to the Baja Mining board. With a vote that close, and judging by the volume of behind the scenes email traffic I’ve been getting from Baja Mining stockholders, I imagine that Mount Kellett must be wondering whether my blogging made the difference and what they should have done (or not done) to piss me off. There’s probably no way of knowing if I made the difference or not, but Mount Kellett sure went to extraordinary lengths to try to knock my blogs off of page one searches for “Mount Kellett.”

A Shake Up or an Earthquake?

Up until recently, the Mount Kellett representatives on the board of directors of Evoq (formerly Meruelo Maddux Properties Inc) were Andrew Axelrod and Albert Ho. Within the hierarchy of Mount Kellett, Axelrod was senior and Ho junior. In the wake of the Mount Kellett’s Baja Mining debacle — which has got to have really cost them a lot of credibility (not to mention “face”) in the investing world — Ho is now out and has been replaced by somebody senior in the MK hierarchy to Axelrod (I’m told his name is Kevin McCarthy). If Ho had been replaced by somebody similarly subordinate in the MK hierarchy to Axelrod, I’d characterize it as a simple shake up. When somebody is brought in from higher up in the hierarchy, that’s an earthquake. The sociology and psychology of the action indicates that there is a lack of confidence in the existing representatives to fend off problems and make money for the company.

Some earthquakes can trigger avalanches and that avalanche is just coming over the horizon for Mount Kellett and Evoq. The key thing to watch for is what Mount Kellett does between now and July 25, 2012. That is when a $10,000,000 payment is due on Evoq debt. Where exactly do they intend to come up with the payment? Nobody can really answer that question since they haven’t bothered to provide either the SEC or their own shareholders with any financial report. As I’ve pointed out before, they’ve made a mess of Evoq’s finances by cancelling leases and licenses to deprive the company of all of its primary income streams.

Another reason that they probably haven’t filed reports with the SEC might have something to do with the board’s refusal to provide Ernst & Young, the company accountants, with formal representations that their figures are accurate. Consequently Ernst & Young have refused to issue an audited statement for use with SEC reports that need to be filed under penalty of perjury.

Mount Kellett can’t even dot i’s or cross t’s

Today I went over to 1099 S Grand Ave in Los Angeles where United Paving Company (a dba of Superior Paving Company of La Mirada) was busy paving a lot so that it can be used as a parking lot. There were several problems apparent with the project:

• I asked the construction workers and their foreman on the site if they had a paving permit and/or a land use permit enabling the property to be used as a lot. They didn’t have one. They’re required not just to have taken out these permits, they’re supposed to have them on-site in case the City Building & Safety Inspectors drop by. The foreman got me on the telephone with their head office and they confirmed that they hadn’t obtained one and expressed from vague belief that maybe their client had gotten the permits. This isn’t just a technical problem: a construction engineer who had observed how they were paving over the lot indicated that they weren’t bothering to compact the asphalt.
• As an “oh by the way,” the lot they’re paving for parking was permitted to be developed into a twenty story building, not a parking lot.

FRP Sandwich Panel

Then there’s the problem of 788 W 8th Street Los Angeles. Mount Kellett/Evoq received $1.2 million in an insurance settlement due to water damage and a collapsed roof to fix the facility, which included a cold storage unit. The building had been utilized by about thirty (30) produce vendors which the Mount Kellett/Evoq folks decided to throw out, destroying their businesses and forcing their employees out of work. If our calculations are correct, then here’s what these clowns probably did:

• Terminated a perfectly competent minority contractor who’d begun work on the facility and promptly brought in a higher priced bidder.
• Ran the project until it ran out of money so that it could not be completed for the amount of the insurance settlement.
• Stiffed people who’d already worked on the repair project.
• Ignored the specifications that have already been permitted by City Building & Safety.
• Used materials that were specifically inferior to those that were permitted, i.e., instead of using FRP insulation (Fiberglass Reinforced Plastic) in a way that was sandwiched as metal - Styrofoam - metal they’re using nothing but Styrofoam as insulation. The problem of the way they are using it is that when used like this around the cold storage unit (amongst other structural problems) it will cause condensation which in turn will encourage mold growth which leads inevitably to destruction of the roofing material. At the risk of making an ad hominem (abusive) comment, this methodology may indicate that some of the people currently involved in the project and those who accepted their bid are real idiots.

This brings up one of the patterns we’re seeing consistently throughout the management of Evoq brought in by Mount Kellett. If there’s one thing they seem to be consistent about it is replacing ethnic minorities and immigrants (whether employees or independent contractors) with white people and paying them more, whether they’re worth it or not. At the risk of leaving you dangling, there will be more about this latter topic later, but to whet your appetite, here’s what’s to come:

• Which employees are paid more than others simply because they’re having sex with one of the people that Mount Kellett brought in to manage Evoq?
• Which employee was fired solely because he was Gay (and does that make you wonder whether Mount Kellett’s C.O.O.’s support for Michelle Bachmann was just because she called President Obama a socialist or does he also like her and her husband’s homophobic attitudes)?
• Ted McGonagle was let go by Mount Kellett recently….who’s head is next on the chopping block?
• Was Mount Kellett’s Evoq managers’ disparate impact policies against minorities, immigrants and Gay people and their tolerance of quid pro quo sexual harassment and discrimination an aberation or was it actually motivated by animus towards these classes of people?

Oh yeah. As another “oh by the way,” Evoq stock dropped another fifteen cents yesterday (down from $4.50 just the other day) to $4.00….

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