Costa Brava Officers Smacked Down Over Board Seat Use

Jul 9 2008 | 2:00am ET

Boston hedge fund Costa Brava has had no luck in the courtroom of Judge Albert Matricciani in its battle with defense contractor Telos Corp. Its string of unpleasant experiences with him continued this week.

Matricciani, of Baltimore City Circuit Court, had already dismissed the activist hedge fund’s battle to have the company put into receivership and dissolved, and said at the time that the fight had “come to an end, at least in this forum.”

Wishful thinking, perhaps: The judge last month issued a preliminary injunction against the two Costa Brava officers who won election to Telos’ board of directors last year, barring them from contact with the company’s former, current and future auditors after Telos alleged the two made repeated threats against its last two independent auditors, leading to the resignation of both.

According to Telos, auditor Goodman & Co. quit after being sued by Costa Brava, and its successor, the Reznick Group, resigned in April “after receiving threatening communications from Costa Brava.”

Matricciani ruled that the conduct of Seth Hamot and Andrew Siegel “indicates that they put their interests ahead of the corporation they were supposed to be serving, and sought to disrupt the company’s essential relationships to serve their own ends.” The judge added, “Telos is likely to demonstrate the their conduct was not just wrongful, but unlawful” under the Sarbanes-Oxley Act.

“We welcome this order by Judge Matricciani, and hope that this injunction will bring an end to the improper and self-interested acts of Seth Hamot and Andrew Siegel that violate their fiduciary duty as Class D directors of Telos Corp.,” Telos spokesman Warren Jones said. “We hope that we can finally move beyond this costly and protracted battle to focus our efforts on building our business and supporting the critical needs of our customers.”

Telos said that Hamot and Siegel have indicated that they will appeal the injunction.


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