Years before David Richter launched his bid to oust Rep. Andy Kim (D-Moorestown), the former Hill International CEO faced criticism from shareholders over his compensation at the firm.
In a stockholder statement filed with the Securities and Exchange Commission, Phillip Goldstein, manager of the Bulldog Investors hedge fund, charged Richter was being paid too much.
In 2015, Goldstein said, Richter received total compensation of $3.6 million. Hill International reported $720.6 million in total revenue and $6.9 million in net earnings that year.
“Unlike Hyman Roth in the Godfather II who always made money for his partners, the Richters only seem to make money for themselves,” Goldstein said in the stockholder statement. “It is apparent that the current board is not up to the task of correcting the disconnect between the Richters’ lavish compensation and their failure to generate stockholder value.”
The ensuing 2017 proxy fight took aim at the $88,646 of non-salary compensation Richter received more than a decade ago in 2006. That figure included $30,550 for vehicles for Richter and his family, as well as $44,235 for household employees, though the firm ceased providing money for the latter after a June 28, 2006 merger between Hill and Arpeggio Acquisition Corporation.
The proxy fight ended with Goldstein-backed winning seats on the company’s board.
“What you’ve got to understand about those attacks is they came from an activist shareholder whose business is to take control of companies, and they do that by painting the management in as bad a light as possible, and this activist was no exception,” Richter said.
That much is true. Goldstein has styled himself as “a penny-ante Icahn,” referring to billionaire activist investor Carl Icahn, who made much of his fortune through hostile takeovers and asset stripping.
Hill wasn’t stripped for parts, though Richter left the firm not long after the Goldstein-backed directors joined the firm’s board.
“I was trying to build a company, and they were trying to tear it apart and sell it off,” he said.
Still, Richter says the investor duped the company’s shareholders.
“When I left Hill, the day I left Hill, the stock was $4.20 a share. As I’m looking at the screen right now, the stock’s a $1.66,” Richter said. “That activist lied to our shareholders, had a very misleading campaign, and now that I’m not running the company, the stock is practically a third of what it was when I was the CEO. That should tell you a lot about how I ran Hill International.”
The company’s stock price has plummeted since the onset of the COVID-19 crisis. On March 4, when the United States reported its first case of the virus, the stock was valued at $3.08, or about 27% lower than Richter left the company.
Hill has had run-ins with the SEC on separate occasions.
In January, the commission charged the firm and two of its former employees, former CFO Ronald Emma and senior accountant Nicholas Tornello, with accounting fraud for their alleged failure to properly report roughly $5 million in foreign currency exchange losses.
Hill and Emma agreed to settlements that saw them pay $500,000 and $75,000, respectively.
“The accounting decision that was made in error was made before I was CEO at a time when the finance department did not report to me,” Richter said. “Although I was often involved in accounting and finance issues, this issue never came up to my level.”
Richter served as Hill’s CEO between 2014 and 2017. Before that, he was the firm’s president and COO for 10 years.
The SEC alleged that Emma and Tornello attempted to bleed out the currency losses over a period of a few years, boosting net earnings between May 2014 and March 2017.
Former Burlington County Freeholder Director Kate Gibbs, who Richter defeated in last month’s Republican primary, launched a single attack over the SEC charges, but it’s not clear whether Kim will take the same tack.
“Opportunists, whether they be activists shareholders or political opponents, are more than happy to talk about my business record,” Richter said. “But I think when the voters see what I accomplished, I think they’re going to see that I have a very successful track record in the business world, and I expect to do the same once I get to Congress.”