Issues Letter to Board Scrutinizing the Suitability of
Lead Independent Director Dino
Chiesa, Who Called Spruce Point's Research "Baseless" and
Retains "the Utmost Confidence in Management"
Highlights That Mr. Chiesa is Chairman of Sienna Senior
Living (TSX: SIA), Which the Canadian Press Says is Under Criminal
Investigation and Faces Hundreds of Millions in Lawsuits Stemming
From COVID-19 Deaths
Questions Mr. Chiesa's Ability to Function as GFL's Lead
Independent Director and Serve as a Check on Chairman and CEO
Patrick Dovigi While Devoting his "Full Time" to Sienna
Reiterates a Strong Sell Research Opinion and Encourages
Investors to Review Spruce Point's 107-Page Report
NEW YORK, Sept. 23, 2020 /PRNewswire/ -- Spruce Point
Capital Management, LLC (together with its affiliates,
"Spruce Point"), a New York-based investment management firm that
focuses on forensic research and short-selling, today issued an
open letter to the Board of Directors of GFL Environmental Inc.
(NYSE: GFL and GFLU and TSX: GFL) ("GFL" or the "Company"). The
letter exposes additional evidence of insufficient and poor
corporate governance at GFL, specifically pertaining to Lead
Independent Director Dino Chiesa. As
a reminder, Spruce Point issued a
107-page report on August 18, 2020
entitled "Green for Life, Red for Losses" that outlines why shares
of GFL face 100% downside risk. GFL has still not publicly
addressed any of the "inaccuracies" alleged in our report.
The full report can be downloaded and viewed at
www.sprucepointcap.com.
The full text of the letter is below.
***
September 23, 2020
The Board of Directors
GFL Environmental, Inc.
100 New Park Pl Suite 500
Vaughan, ON L4K 0J3, Canada
Attn: Paolo Notarnicola, Chair of
the Nomination, Governance and Compensation Committee
Mr. Notarnicola,
Spruce Point Capital Management, LLC (together with its
affiliates, "Spruce Point")
continues to believe that GFL Environmental, Inc. ("GFL" or the
"Company") is plagued by an array of corporate governance
weaknesses, disclosure lapses, financial control and reporting
issues, and operational and strategic flaws. With each passing day,
we are finding additional evidence in support of our view that the
Company's shares are uninvestable for institutions and face 100%
downside risk. We are contacting you today because you are the
Chair of GFL's Nomination, Governance and Compensation Committee
(the "Committee") and presumably understand the importance of
having a credible, integrity-rich Lead Independent Director at a
company with a combined chairman and chief executive role. In our
view, GFL does not currently have one.
In response to Spruce Point's
107-page report issued on the morning of August 18, GFL issued the following statement in
the afternoon from Lead Independent Director Dino Chiesa:
"We are very disappointed by the baseless report put out
today by Spruce Point Capital […] Spruce
Point has never engaged with the company and the report is
without merit. We have the support of our shareholders and the
utmost confidence in management, who have held themselves to the
highest ethical standards. We continue to believe in the strategy
of the business and its focus on creating long term shareholder
value."
We contend that Mr. Chiesa lacks the ability to make such a
declaration and is unfit to serve as a public company director. Mr.
Chiesa's current tenure as Chairman of Sienna Senior Living
("Sienna"), which is currently under criminal investigation and
faces hundreds of millions of dollars in lawsuits, has become an
unmitigated disaster. Sienna's alleged abuse and negligent
actions towards senior citizens are believed to have contributed to
more than 110 deaths over the course of the COVID-19 pandemic in
2020. The organization's practices have been well chronicled in a
report issued by the Canadian Armed Forces, which observed shocking
patterns of underfeeding, improper wound care, and general patient
negligence at Sienna's Altamont Care Community. An independent
report issued on June 16 by Global
News reveals that, through June, more COVID-related deaths had
occurred at Sienna-owned-or-operated facilities than any other
long-term care provider in Ontario, despite Sienna being only the
third-largest long-term home operator in the province by facility
count. Sienna's disturbingly poor record through the COVID pandemic
and reports of mistreatment of its patients during a national
health crisis raise serious questions as to Chiesa's ability to
oversee any company effectively.
Further, we wonder how Mr. Chiesa had the time and wherewithal
to even review Spruce Point's
lengthy report on August 18 when he
told The Toronto Star in June that he is "working full time
trying to straighten out what's going on at Sienna Senior Living."
In fact, Sienna's issues have been so enormous and time-consuming
that Mr. Chiesa, by his own admission, has been forced to step away
from his duties as Chairman of CreateTO to commit his full time and
attention to Sienna. If Mr. Chiesa does not have enough time to
attend to his duties as a Director of CreateTO, why has he not also
stepped away from his identical role at GFL – an
aggressively-acquisitive, multinational, multi-billion dollar
company whose Board duties are likely at least as
time-consuming as CreateTO's? If nothing else, it seems to us that
an individual embroiled in a national health scandal and working
"full time" to manage a corporate crisis is not best equipped to
serve as GFL's Lead Independent Director, especially in the wake of
the issues highlighted by Spruce
Point pertaining to the Company's acquisitions, financials,
and c-level business affiliations. Perhaps having a preoccupied and
weak Lead Independent Director has enabled Chairman and Chief
Executive Officer Patrick Dovigi to
maintain what we believe are highly-questionable connections to
individuals with past criminal issues. These connections are
outlined on various pages of our report if you and the Board would
like to reacquaint yourselves with Mr. Dovigi's network.
As a senior leader at BC Partners, surely you are aware that
your own firm touts taking "an active role in improving ESG
awareness, performance and compliance in each portfolio
company."1 It appears to us that GFL is striking out
on all three fronts when it comes to the environment, governance
and social stewardship. Perhaps you can use your role on the
Committee to assess, acknowledge and address GFL's numerous issues
ahead of a potential regulatory action or financial collapse. We
believe both outcomes are highly likely on the Company's current
trajectory.
Sincerely,
Ben Axler
Founder and Chief Investment Officer
Spruce Point Capital Management
***
Please note that the items summarized in this press release are
expanded upon and supported with data, public filings and records,
and images in Spruce Point's full
report. As a reminder, our full report, along with its investment
disclaimers, can be downloaded and viewed at
www.sprucepointcap.com.
Spruce Point has a short
position in securities tied to GFL and stands to benefit if its
share price falls.
About Spruce Point
Spruce Point Capital Management, LLC is a forensic
fundamentally-oriented investment manager that focuses on
short-selling, value and special situation investment
opportunities. Spruce Point Capital Management, LLC is a member of
the Financial Industry Regulatory Authority, CRD number 288248.
Contact
To contact Spruce Point, please
reach us online.
1 https://www.bcpartners.com/about/responsibility
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SOURCE Spruce Point Capital Management, LLC