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Magellan Petroleum Corporation Message Board

  • pipelead pipelead Dec 7, 2012 2:57 PM Flag

    Bogachev's Statement ( from 12/7 amended 14A )

    Statement by Mr. Bogachev -- 12/7/2012
    Dear Shareholders:

    The following is my response to the proposal of committees of the Board of Directors of the Company to remove me as a Director of the Company for alleged “cause.” I did not receive notice of or participate in any of those committee deliberations nor was I given any opportunity to discuss their removal proposal prior to its publication.

    You should understand that it is clear to me that the sole reason for seeking my removal is my repeated and articulated disagreement with the procedures, actions and inactions of the Board involving in my opinion a failure of the other Directors to exercise their fiduciary obligations of governance and oversight. In my judgment this failure has resulted in ineffective and improper management causing substantial losses of shareholder value that are obviously reflected in the Company's substantial continued stock market declines. The foregoing was brought to a head by my recent demand, made on behalf of the Company and on behalf of all of the shareholders, that the Company institute legal action against the other Directors for the recovery by the Company of damages from their mismanagement. The Board's response to the this disagreement and the resulting demand for legal redress has simply been to seek my removal as a Director.

    Before discussing the fundamental disagreement between the other Directors and me, I want to highlight several related matters. First, in addition to directly owning stock in the Company, as the owner of an affiliated entity, Young Energy Prize S.A. (YEP), I continue to have a legally recognized equitable and beneficial interest in the more than nine million shares previously titled in YEP's name and recently retitled in the name of Sopak AG in light of the fact that the proceeds from any disposition of those shares by Sopak will be applied for my benefit. As a result Sopak has acknowledged my continuing interest in the stock. The pledge of my shares to Sopak occurred when they were acquired more than three years ago and when I became a Director and the Company has been aware of that pledge throughout.

    Second, with regard to Stratex, during the Spring of this year I was contacted by the CEO of Stratex who knew of me as a result of a school friendship of our sons and on behalf of Stratex he expressed an interest in acquiring the YEP shares in connection with a merger proposal Stratex intended to make to the Company. The terms of that merger proposal were not communicated to me. Because I believed that the Company needed to consider all strategic alternatives for increasing shareholder value I offered to put him in touch with Tom Wilson, the Company's CEO, which I did. I did not attend any of the Stratex meetings with Mr. Wilson and thereafter I had no further substantive communications with Stratex or its CEO. With regard to the subsequent regulatory inquiry, I cooperated fully with the inquiry and neither I nor any affiliated entity have engaged in any Company stock trading.

    And third, I have been advised that the “cause” required under Delaware law and the Company's Bylaws for removal of a director legally must involve egregious conduct which is not applicable or alleged here. Rather what is at issue here are the business disagreements which I have had with the other Directors and continue to have with respect to the governance and management of the Company. That is, I have been advised that the Delaware courts have previously indicated that such business disagreements do not constitute "cause". Accordingly, and based on the foregoing advice, it is my view that the entire effort of the Company to have me removed as a Director is without "cause" and therefore improper.

    With regard to the facts and merits of the matter, throughout my tenure on the Board I have considered myself singlely aligned with all of the shareholders of the Company to an extent more than all other Directors by virtue of the very large shareholding of YEP which was a large multiple greater than the shareholding of each other Director and of the shareholdings of all of the other Directors combined. Throughout I have endeavored only to enhance the value of the Company beginning with my initial purchase of the YEP stock at a very substantial premium over its trading price at that time continuing with my entity's sale to the Company thereafter of my previously owned substantial majority interest in the Poplar oil and gas asset at a price very favorable to the Company. And obviously my interest in currently continuing to do whatever I can to enhance shareholder value is totally aligned with the interests of all shareholders.

    In my role as the largest shareholder and a Director beginning more than a year ago I vocally and continually expressed disagreement with the plans and activities of the Company and I was outspoken that they would result in continued large cash flow losses and the diminution of shareholder value. Unfortunately, that is what has occurred. During this period, the Board never chose to seriously consider and debate shareholder value but generally routinely rubber-stamped management budgets, programs and recommendations. Board meetings were often preceded by inadequate agendas and explanatory materials provided without reasonable notice and the meetings often in telephonic form were held in the middle of the night in Moscow where I reside thereby limiting my participation.

    My dissatisfaction was articulated at length at last year's annual shareholders meeting and at the associated Board meeting and at that time I proposed and was successful in having the Board agree to the formation of a strategic alternatives committee with a charge to candidly and aggressively consider all available possibilities for enhancing shareholder value. Mr. Wilson was designated to head that committee, which included me and one other Director, and its formation was publicly announced.

    Unfortunately however, and despite my repeated calls for committee action, the committee was never allowed by the Board or Mr. Wilson to function and to my knowledge the committee does not even exist at this time.

    I make no apology for my strong objections to the Company's performance. Throughout I have been specific in my charges ranging from objecting (i) to the manner in which Australian assets and Australian transaction efforts have been handled, (ii) to the lack of oversight of accounting and reporting functions leading to the resignation of the Company's audit firm and to a lack of credibility in the financial community, and (iii) to the excessive cash and equity compensation of the Board and management without any apparent linkage of the compensation to Company performance, along with other excessive overhead expenditures.

    The Company's proposal to remove me as a Director is plain and simply an effort to eliminate my voice objecting to how the Company is governed by an inactive and passive Board and how its management functions, including my objection to the Company's failure to aggressively pursue strategic alternatives for rebuilding shareholder value. While the foregoing simply does not constitute legal “cause” for proposing my removal, it may nonetheless function as a useful opportunity for a referendum vote of the shareholders on their dissatisfaction with the Company's Board and management and their dissatisfaction with their performance on behalf of the shareholders.


    Thank you.
    Nikolay V. Bogachev.

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