In a secret court fight, a major stockholder in Computer Network Corp. is seeking an order to bar the company from acquiring another firm in the near future.
John Spohler, a New York stockbroker who has been criticizing the company for poor management, hinted in an interview that he believes Comnet is getting ready to buy another company by issuing new stock. Such a move could dilute the company stock, thereby making it harder for disgruntled shareholders to challenge management successfully, Spohler said,
"But I can't say another word," he added, saying his motion for a temporary restraining order is confidential because U.S. District Judge Norma Johnson agreed to Comnet's request to keep the papers from being made public.
However, Comnet Chairman Lee Johnson confirmed the existence of Spohler's motion yesterday. Johnson said the motion and subsequent hearing on it this week were confidential because they involved nonpublic information "about an acquisition that may or may not happen." Comnet "has been negotiating and working on many acquisitions; but it hasn't taken any action," Johnson said. "Mr. Spohler wants to stop it without even knowing what it is."
The MacArthur Boulevard company specializes in computer processing services for the government and private industry.
Johnson said that, if any of the information about the possible acquisition were made public, a small group of stockholders would receive inside information, "and they would make a profit from it."
The motion for a temporary restraining order is only the latest skirmish in a long-running battle between Johnson and Spohler.
With a group of other investors, Spohler has control over nearly a quarter of the company's stock. Although Spohler has filed forms with the Securities and Exchange Commission noting his large control, Johnson has accused Spohler of failing to file the forms promptly and also misleading the SEC when he said he had no intention of changing the company management.
Spohler, on the other hand, says that he has no intention of taking over the company or changing the management. However, he notes that his group of shareholders is trying to undo several recent actions taken by management without any vote of the stockholders.
Spohler is especially critical of a "deferred compensation" plan enacted by Comnet for its top five officers last year. Under that plan, Comnet automatically would have paid its officers 10 years of salary and benefits if 50 percent or more of the company's directors are replaced--a sum that could amount to as much as 50 percent of the company's current net worth.
Although Comnet just amended that compensation plan so that five years of salary and benefits would be granted by a change in management, Spohler still calls the plan "an outrageous golden parachute" that would reduce the company's assets by at least 15 percent, and possibly twice that much, in any takeover.
Spohler also criticizes Comnet's purchase last year of Data Systems Inc. Spohler argues that Comnet paid too high a price for Data Systems, and he objects to the method of purchase. Among other things, the purchase price included the issuance of 227,000 shares--or 12 percent--of Comnet stock, which was placed in a voting trust overseen by Comnet's directors.
Spohler and his fellow stockholders are trying to win SEC approval to get all shareholders to vote against these and other recent company actions at this year's annual meeting later this summer.