Second Firm Tells Presidential Life Shareholders to Reject Ex-CEO’s Proposals

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January 4, 2010 Monday 03:58 PM EST

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Second Firm Tells Presidential Life Shareholders to Reject Ex-CEO's Proposals

Fran Lysiak

NYACK, N.Y.

A second proxy advisory service has recommended that stockholders of Presidential Life Corp. reject proposals by the company's former chairman and chief executive officer that include removing the company's board of directors and replacing them with nominees that he's proposed.

In its Dec. 29 report, Proxy Governance Inc. calls Herbert Kurz's strategic plan "unimpressive;" states that his core allegation against the company "has some substantial credibility challenges;" and describes some of his explanations as "Kafkaesque," Presidential Life (NASDAQ: PLFE) said.

An outside spokesperson for Presidential Life declined to comment beyond the company's statement.

Kurz, 89, was the long-time CEO of the Nyack, N.Y.-based Presidential Life until May 2009, at which time Donald Barnes assumed the CEO position.

Kurz, who founded the company, was replaced as part of a succession plan approved in 2008. But in November, Kurz went directly to shareholders, urging them to replace the current board with his own slate of nominees to put him back in as CEO.

Soon after, the company's board removed Kurz as chairman, saying a special committee of independent directors found irregularities in a 2007 tax return filed by the Kurz Family Foundation Ltd. Kurz, a director and stockholder of Presidential Life, also is an officer and director of the foundation. The return showed possible self-dealing by Kurz and improper use of charitable assets for personal expenses (BestWire, Dec. 11, 2009).

In the letter to shareholders urging support to remove the current board -- besides himself -- Kurz wrote that he has "become increasingly frustrated with Presidential Life's operating results and shareholder returns, and I believe that the only way to reverse this decline is to remove the current board of directors (other than me) and replace them with the outstanding slate of nominees I have proposed.

"My nominees, if elected, intend to dismiss CEO Donald Barnes and, as soon as possible, recruit a new, highly qualified CEO to work with the newly constituted board to restore our company's core values -- simple products, stringent cost controls and prudent investments," Kurz wrote (BestWire, Dec. 18, 2009).

The foundation and its advisers voluntarily approached the Internal Revenue Service months ago, before he launched his consent solicitation, in an effort to resolve the foundation's pending issues, Kurz wrote. He dubbed the board's investigation of his foundation a "diversionary tactic" (BestWire, Dec. 18, 2009).

Meanwhile, according to Presidential Life, Proxy Governance said the strategic plan the company's board and management team are implementing is "a more compelling growth strategy than the one proposed by the dissidents."

Recently, Presidential Life said Glass Lewis & Co., another proxy advisory service, concluded that "the new management team, including a new CEO, a new CFO and five new board members since April 2008, should be given adequate time to implement the strategic plan unanimously approved by the board, including Mr. Kurz, in November 2008" (BestWire, Dec. 22, 2009).

The life insurer's board also removed Charles Snyder as chief financial officer, who allegedly signed the foundation's tax return as a paid preparer, acting in a personal capacity (BestWire, Dec. 11, 2009).

The New York insurance superintendent has launched an investigation into the foundation's practices. The insurance department issued a subpoena to the foundation and Snyder (BestWire, Dec. 11, 2009).

On the afternoon of Jan. 4, Presidential Life's stock was trading at $9.22 a share, up 0.77% from the previous close.

Presidential Life Insurance Co. currently has a Best's Financial Strength Rating of B+ (Good).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])

January 5, 2010

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