Carter Suspended From Proxy-Soliciting Firm After Confession Report
Donald C. Carter, who turned the dull world of proxy solicitations into a business as boisterous and tough as the Brooklyn streets he grew up on, was suspended Monday from the company that bears his name.
VPI Group, the British parent company of the Carter Organization, suspended Carter after he announced in a newspaper article that he plans to plead guilty later this week to two felony counts of grand larceny and tax evasion. Carter reportedly said he overcharged clients by $1 million and charged some personal expenses to his company.
Carter’s legal problems were no secret to the parent company. Indeed, VPI says it has been cooperating with an 18-month-old investigation by the New York State Organized Crime Task Force into Carter’s alleged improprieties. But VPI officials were miffed that Carter failed to warn them about his unofficial confession.
“This is something that we did not anticipate,” said Angus Maitland, VPI’s chairman and chief executive.
Carter, who could not be reached for comment, reportedly said he would enter his guilty plea at a New York state court but gave no specific location or date. His attorney, Robert Gold, was unavailable to confirm the report, published Monday in the Wall Street Journal.
Carter had already been removed as chief executive of the company in January and was kept on to handle only one client, Sea Containers America, Maitland said. VPI may consider suing Carter for damages incurred by his alleged misdeeds, Maitland added.
When Carter opened his firm in 1975, proxy solicitations were a backwater of the financial world. Carter charged a modest $25,000 for overseeing shareholder votes at annual corporate meetings and trying to sway shareholders to vote for his clients.
But the takeover boom of the 1980s put increased importance on proxy solicitations, and the flamboyant Carter was the first, and many say the best, at exploiting the opportunity. By 1988, his company was charging as much as $1 million to advise a client in a proxy fight.
Carter was not known for modesty. He drove a red Bentley with the license plate PROXY. He once told the Los Angeles Times that when companies started thinking about boardroom warfare, “The call goes first to me--not to the lawyers, the investment bankers--but to me.”
Carter made his biggest killing in June, 1987, when he sold his company for more than $75 million to VPI, a British communications firm. Carter said then he planned to stay on indefinitely as the firm’s president.
The firm’s fortunes started sagging in 1988 when it lost proxy battles for several high-profile customers. Client Coniston Group lost a bid to take over Gillette Co., client Bank of New York lost to Irving Trust, and client Burt Sugarman lost a bid for Media General. In the Irving Trust case, a large block of proxy votes were lost and allegations surfaced that another proxy card was altered.
In September, 1988, the Organized Crime Task Force began looking into Carter’s personal taxes and allegations that the firm was padding bills to clients. Maitland said the company has since installed a computerized billing system.
Problems at the Carter Organization and the general cooling in corporate takeovers battered VPI’s earnings. The company’s pretax profits slipped 54% to 6,487 British pounds in 1989, compared to the previous year. VPI stock, traded on the London Stock Exchange, dropped 1.5 pence to close Monday at 23 pence. It had sold for as much as 270 pence before VPI bought the Carter Organization.
Maitland said he fears no repercussions from Carter’s announcement, although company officials did spend most of the day calling to reassure clients, which include Xerox, Goodyear Tire, Sony and Texas Instruments.
John Wilcox, managing director of rival Georgeson & Co., said Carter’s problems could well hurt the Carter Organization. He said his company, which along with Carter and D. F. King & Co. are the three largest proxy solicitors, has picked up about six Carter clients since Carter was removed from executive duties in January.
