Group Believes Board Has Disregarded
Shareholders’ Concerns by Appointing Solomon Trujillo as
“Independent” Chairman
Highlights Conflicting Financial
Arrangements and Interlocks Among Board Members, Including Mr.
Trujillo and Chief Executive Officer Marlow Hernandez
Reiterates Demand that the Board Respect the
Wishes of Shareholders by Making Necessary Leadership Changes or
Reopening the Window to Nominate Director Candidates and Submit
Proposals at 2023 Annual Meeting
Elliot Cooperstone, Lewis Gold and Barry Sternlicht
(collectively with certain of their affiliates, the “Group” or
“we”), who recently resigned as members of the Board of Directors
(the “Board”) of Cano Health, Inc. (“Cano” or the “Company”) (NYSE:
CANO), today issued the below letter to shareholders.
***
Fellow Shareholders,
Our group, which collectively holds an approximately 36% equity
position in Cano, is writing in response to the Company’s April
17th announcement that Solomon “Sol” Trujillo has succeeded Dr.
Marlow Hernandez – the Company’s Chief Executive Officer – as
Chairman. Mr. Trujillo’s appointment is another clear attempt to
entrench the current Board and insulate Dr. Hernandez from
much-needed accountability. Further, the Company’s recent press
releases are full of misleading information and ignore the pressing
issues on the minds of shareholders. In short, we believe the Board
has even further damaged its credibility.
In our view, all shareholders should take note of the following
points:
We believe the appointment of Mr.
Trujillo as Chairman represents a self-interested entrenchment
maneuver and slap in the face to concerned
shareholders.
Rather than appointing a new Independent Chairman with deep
healthcare services expertise and a reputation for great governance
and value creation, the Company instead installed Mr. Trujillo, who
is a former telecommunications executive with zero healthcare
experience, has a well-documented history of questionable insider
deals and is one of the primary enablers of the issues facing Cano
today. Mr. Trujillo served for nearly two years as Lead Independent
Director of a company that is rife with governance failures, a lack
of transparency around related-party transactions and other
conflicted arrangements, as well as atrocious financial
performance. Mr. Trujillo’s unwarranted elevation is yet another
slap in the face to Cano shareholders, whose questions regarding
conflicts, related-party transactions and oversight of management
remain unanswered.
Mr. Trujillo’s past is checkered with examples of cronyism and
self-dealing, which is easily verified by a quick Google search.
For example: Mr. Trujillo left Australian telecommunications
company Telstra Group Limited in 2009 with an $11 million payout
after years of shareholder discontent;1 was Chief Executive Officer
of U.S. West, Inc. (“U.S. West”) when the Colorado Public Utilities
Commission found that U.S. West had liberally violated its
telecommunication service quality rules and was ordered to refund
more than $11 million to customers;2 and, during a three-year stint
as Chairman and Chief Executive Officer of Graviton, alienated
employees and mismanaged the business – with a former human
resources leader saying that the company’s demise can be attributed
“a great extent” to Mr. Trujillo.3
Mr. Trujillo is far from independent, given his dealings with
Cano and significant ties to other Board members. Examples include
the following:
- Cano, a company in dire financial shape, recently spent
hundreds of thousands of dollars sponsoring, alongside
multi-billion dollar market capitalization companies, a 2022
conference put on by L’Attitude, LLC, where Mr. Trujillo is
Managing Partner.4 These sponsorship expenditures – which appear to
provide limited relevant business benefits to Cano – came at a time
when the Company was hemorrhaging cash and planning to terminate
hundreds of employees. To our knowledge, none of Cano’s sponsorship
payments to Mr. Trujillo’s organization L’Attitude have been
disclosed in the Company’s filings as a related-party
transaction.
- Encantos, an education technology company chaired by Mr.
Trujillo, received funding in 2022 from Morales Capital, a firm
owned by Cano Board member and Audit Committee Chair Angel
Morales.5
- Mr. Trujillo and Cano director Jaqueline Guichelaar, who he
recruited to the Cano Board, have served together on at least one
other board.
Turning to the other remaining directors, it is confounding that
these individuals, who hold or recently held senior positions at
well-respected companies and who own almost no stock in Cano other
than that received for their Board service, have remained loyal to
Dr. Hernandez and Mr. Trujillo. This unfathomable fealty poses a
grave risk to their reputations and raises significant questions
about boardroom independence. We do not understand why these
directors would blindly align themselves with conflicted
individuals, who have apparently engaged in self-dealing and are
responsible for epic failures of good corporate governance. For
reference:
- Ms. Guichelaar is SVP & General Manager of Customer
Experience for Asia Pacific, Japan, and Greater China at Cisco
Systems Inc. (NASDAQ: CSCO), previously held other senior roles at
that company, and, prior to that, was the Group Chief Information
Officer at Thomson Reuters Corporation (NYSE: TRI).
- Kim M. Rivera is the Chief Legal and Business Officer of
OneTrust LLC, a currently private company backed by Coatue, TCV,
Softbank and Franklin Templeton. Ms. Rivera previously served as
Special Advisor to the CEO, President, Strategy and Business
Management and Chief Legal Officer at the Hewlett-Packard Company
(NYSE: HPQ) and Chief Legal Officer and Corporate Secretary for
DaVita HealthCare Partners Inc. (NYSE: DVA). Ms. Rivera is also
currently an independent director at Thomson Reuters
(NYSE:TRI).
- Dr. Alan Muney was formerly the Chief Medical Officer of The
Cigna Group (NYSE: CI) and is currently an advisor to Bain Capital
and New Enterprise Associates.
We question how these individuals can credibly serve any company
or investment firm while they oversee the egregious governance and
ongoing value destruction at Cano.
Cano’s recent communications completely
ignore related-party transactions and include misleading
statements.
In its April 17th letter to shareholders, Cano conspicuously
avoids addressing the numerous concerns we have raised regarding
Dr. Hernandez’s pledging of stock for loans, related-party
transactions and other evident abuses of power. Shareholders should
see through this attempt to gloss over such glaring issues and
question why Dr. Hernandez remains CEO of the Company. We also
question whether there are additional undisclosed loans involving
Dr. Hernandez and look forward to bringing this information to
light if and when we learn more.
Cano also suggests that the three of us approved expansion
transactions, self-dealing, questionable loans and other actions
that our Group has recently condemned. The reality is that many
decisions regarding transactions – dating back to Cano’s early days
as a public company – seem to have been made on the basis of
inaccurate information and flawed projections presented by
management. It is disingenuous for the Company to shift the blame
for its own malfeasance by saying that we supported each and every
decision the Board made when the record will clearly show that we
vocally opposed many of these actions and were overruled or just
kept out of the loop.
Further, the Company’s continued argument that we are short-term
investors is false. All three of us have substantial, decades-long
track records of delivering for investors over the long-term at
both public and private companies. We are also long-term investors
in Cano: Elliot Cooperstone’s InTandem Capital Partners invested
when Cano was a private company, as did Dr. Lewis Gold. Barry
Sternlicht has been an investor since the de-SPAC transaction with
his Jaws Acquisition Corp. We have no interest other than
delivering great outcomes for shareholders, members and employees.
We look forward to providing additional detail about the manner in
which a de facto shadow Board ran roughshod over truly independent
directors.
The Board must abide by its
responsibility to represent all Cano shareholders by re-opening the
nomination and proposal window so shareholders can make their
voices heard.
We have received overwhelming support from our fellow
shareholders and believe we speak for well in excess of the
majority of shareholders of the Company. We question who this
Board thinks it represents if not the shareholders?
We have not received a response from Cano regarding our demand
to re-open the window for the nomination of director candidates and
proposing other business at the 2023 Annual Meeting of Stockholders
(the “Annual Meeting”). We reiterate that request and stand ready
to work constructively to reconstitute the Board.
In addition, we remain convinced that Dr. Hernandez must be
removed as Chief Executive Officer given his poor capital
allocation, abysmal performance, and disregard for good corporate
governance, transparency and ethics. We believe there are competent
senior leaders in the Company who could manage through a transition
and help Cano move forward and many qualified healthcare executives
have reached out to offer to help restore the Company to a position
where it can be successful once again. With new leadership and a
reconstituted Board, the Company could free itself from its current
governance morass and focus on its great mission of delivering for
underserved patients, while creating value for shareholders.
We look forward to continuing to advocate for the best interests
of Cano and all of its shareholders.
Sincerely,
Elliot Cooperstone
Lewis Gold
Barry Sternlicht
As a reminder, shareholders can privately
contact the Company and request that their feedback be shared with
the full Board by emailing investors@canohealth.com.
Shareholders may also reach the Group at
CanoInvestorGroup@longacresquare.com. The Group will keep all
conversations confidential, unless otherwise instructed.
1 Source:
https://www.smh.com.au/business/companies/from-the-archives-sol-trujillo-s-11-1-million-farewell-20190225-p51009.html
2 Source: “Is Sol Trujillo the Most Incompetent Man In Business?”
https://www.youtube.com/watch?v=DHb7kVFsW-U 3 Source: “Is Sol
Trujillo the Most Incompetent Man In Business?”
https://www.youtube.com/watch?v=DHb7kVFsW-U 4 Source:
https://lattitude.net/sponsor-experiences/ 5 Source:
https://www.encantosworld.com/press/encantos-raises-5-7m-to-accelerate-digital-and-physical-subscription-products
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230426005582/en/
Investors:
HKL & Co., LLC Peter Harkins, Jr. / Jordan Kovler Toll-Free:
(800) 326-5997 CANO@hklco.com
Media:
Longacre Square Partners Greg Marose / Joe Germani
gmarose@longacresquare.com / jgermani@longacresquare.com
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