Internal Whitney corporate investigation calls for him to step down as CEO
In a Nov. 9, 2007, news release, Whitney Information Network, Inc., (Pink Sheets:RUSS) announced the results of the Company’s investigation conducted by a Special Committee of the Company’s Board of Directors (the “Special Committee”) and a restatement of its consolidated financial statements…the Special Committee found that, among other things, before the start of the government investigations, the Company’s marketing function—including advertising for Company products, solicitation of customers, presentation of live seminars, telemarketing, coaching and mentoring—was characterized by inadequate controls, inadequate training and a failure to devote adequate resources to compliance.
The Special Committee also criticized a variety of practices, including, among others, use of testimonials obtained for one brand in support of another, failure to disclose affiliations between endorsers and the Company, failure to adequately disclose investment risks, and misstatements by certain live speakers.
With respect to the Company’s acquisitions of certain other companies, among other findings, based on WilmerHale’s investigation, the Special Committee…found that the Company’s prior public disclosures were incorrect in the [several] respects:
…the Company will need to restate its financial statements for the years ended December 31, 2002, to the present.
Additional recommendations of the Special Committee that are continuing to be reviewed by the Board of Directors relate to (1) the process of appointing three additional independent members to the Company’s Board of Directors based on the nominations of the independent Nominating Committee (after consultation with the other Board members), and (2) management changes, including, among other things, that Mr. Whitney should step down as Chief Executive Officer …; that Ronald S. Simon, currently Co-President and Chief Operating Officer, should step down as an officer and director …
In addition, the Company is reviewing certain other matters (including aircraft usage by Mr. Whitney and others, compensation expense of employees regarding work performed for Mr. Whitney’s private businesses, compensation paid to Mr. Whitney’s and Mr. Kane’s family members, and Mr. Whitney’s business expenses)…
You can see the complete text of the Whitney news release at http://phx.corporate-ir.net/phoenix.zhtml?c=135427&p=irol-newsArticle&ID=1075783& highlight=. Also, Whitney’s corporation filed a more complete version with the U.S. Securities and Exchange Commission at http://www.sec.gov/Archives/edgar/data/1095276/000104746907008933/a2181045z8-k.htm. The Special Committee engaged the law firm of Wilmer Cutler Pickering Hale and Dorr, LLP to assist with this investigation.