Disgruntled Shareholder Takes Second Try at Chad Board Seat

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Disgruntled Shareholder Takes Second Try at Chad Board Seat

WALL STREET WEST

One year after losing a proxy fight to gain control of two seats on Chad Therapeutics Inc.’s board, investor Monte McDowell is at it again.

Last year, McDowell teamed up with real estate developer David Johnson in an attempt to replace two of the Chatsworth-based medical equipment firm’s directors with their own nominees.

That effort was defeated last September, after Chad trotted out examples of Johnson’s legal scrapes including one with the former real estate syndication firm of developer Alan Casden. In a successful civil suit last year, Casden’s National Partnership Investments Corp., now part of Apartment Investment & Management Co., accused Johnson of fraud and “gross financial improprieties.”

This time, McDowell, who owns 4.2 percent of Chad’s shares, has launched a solo bid for a board seat. Accusing Chad executives of ineffective marketing of its line of portable respirators, he claims its management used pro forma numbers to hide its swing from a profit of $1.2 million to a $433,000 loss for the year ended March 31.

“Management and the board of directors have turned around so many times that they are going in circles,” said McDowell in a Aug. 15 filing with the Securities and Exchange Commission.

In response to that claim, Chad Executive Vice President Earl Yager said that most of the $1.2 million profit the company earned for the year ended March 31 was due to a one-time $988,000 federal income tax refund.

Meanwhile Chad has gone on the offensive against McDowell. In an Aug. 18 proxy, it accused him of failing to disclose that he was suing Lincare Holdings Inc., one of Chad’s largest customers, over its purchase of a company from him that went sour. Yager noted that McDowell failed to show up for a face-to-face meeting with the board’s qualifications committee because “he was on a fishing trip in the Bahamas.” (A conference call was done instead.)

Chad accused McDowell of neglecting his responsibilities as a director of Johnson’s Maxus Realty Trust by only showing up for board meetings 60 percent of the time.

“He makes up grandiose statements not backed up by facts. Just like a politician,” said Yager.

McDowell said no face-to-face meeting was ever agreed to, and that he disclosed his lawsuit with Lincare to Chad’s board.

RiShawn Biddle

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