Helix BioPharma (HBP) Reports Troubling Findings Following Shareholder Investigation
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he Special Committee of the Board of Directors of Helix BioPharma Corp. (AMEX: HBP) announces that Ernst & Young LLP) has delivered its Interim Report. As announced on December 6, 2011, the Special Committee engaged Ernst & Young to assist the Special Committee in the investigation of the conduct of certain shareholders and parties related to these shareholders.
Ernst & Young's Interim Report contains a number of findings that are troubling to the Special Committee, including:
There was some degree of confusion with respect to the roles of Andreas and Veronika Kandziora and the two companies with which they are associated, ACM Alpha Consulting Management Est. ("ACM Est.") and ACM Alpha Consulting Management AG ("ACM AG") in their interactions with European investors in Helix securities. For example,
Documents provided to Ernst & Young include July 25, 2010 correspondence from Andreas Kandziora to a potential investor stating that ACM Alpha Consulting Management (www.alpha-cm.com) is the exclusive European representative of Helix BioPharma, responsible for finding/selecting investors willing to buy shares in that company. Their business activity was presented as including share acquisitions (including private placements) and later share disposals for customers. The documents also indicated that all the arrangements are run and supervised by ACM Alpha Consulting Management and further indicate that an investor is bound with ACM under an investment agreement which describes the conditions of participating in the transaction and share of profits depending on the volume of funds invested.
A number of European investors in Helix have confirmed to Ernst & Young that they received contractual promises undertakings or guarantees on the future values of their investments in Helix securities from ACM AG. For example, from documents provided to Ernst & Young:
Correspondence from Andreas Kandziora to a potential investor offered returns based on the amount invested in Helix ranging from 17% returns over 12 months to 70% returns over 24 months.
Promotional documents sent to a prospective investor from ACM Est. stated that under a private placement a guarantor would guarantee the initial capital and that there was an ability to guarantee the minimum return from the investment of 7.5% per year. The documents indicated that there was an option for individual regulation of the amount of the investment, the duration of the contract and the minimum guaranteed return from the investment. They also indicated a profit guarantee in case of investment above 1 Million EUR.
In one investor's contract with ACM AG, the investment of 9,100,000 PLN was guaranteed to return 13,195,000 PLN after one year and 17,290,000 PLN after two years.
Ernst & Young received a copy of a January 5, 2012 email from a bank that has been associated with the Kandzioras, making an offer to two shareholders to buy their Helix shares.
ACM Est. and ACM AG reported purchases of 426,000 Helix shares on the TSX in the period from July 6, 2011 to August 23, 2011 in the 13D report filed on October 3, 2011. Ernst & Young was unable to reconcile all the reported purchases to the TSX daily traded volumes for those days.
To date Ernst & Young has collected information primarily through interviews with Helix management, certain investors and their advisors and documents provided by such persons. Ernst & Young has reported that it has significant work to do to complete its investigation. Its Interim Report is subject to the results of its remaining procedures, and limited by constraints such as the time available, the limited number of European investors who agreed to meet with Ernst & Young and the limited number of documents obtained. Ernst & Young was unable to interview Andreas Kandziora. After arranging a meeting with Andreas Kandziora for January 12, 2012 he cancelled the meeting at the last minute due to other commitments and has not responded to further requests to reschedule the meeting.
The Special Committee informs shareholders that none of the activities set out above have been in any way sanctioned by the Company. These activities, if proven, are improper and inexcusable.
The Special Committee is concerned about the involvement of Andreas and Veronika Kandziora as leaders of the Concerned Shareholders group. After an exchange of letters from counsel to management and counsel to the Concerned Shareholders, the Special Committee has asked the Concerned Shareholders to facilitate an update of their disclosure on the issues and involvement of the Kandzioras in their solicitation. Counsel for the Concerned Shareholders has advised that in their view such an update is not required.
The Special Committee has just received the respondents materials in the application commenced December 7, 2011. The Special Committee is reviewing such materials in conjunction with the Ernst & Young Interim Report. The Special Committee is carefully reviewing next steps.
As stated above, Ernst & Young was engaged to investigate the conduct of certain shareholders and parties related to these shareholders. Their work is ongoing. Ernst & Young is a global leader in assurance, tax, transaction and advisory services, which includes independent investigation and dispute services.
As previously announced, the Special Committee was appointed on November 16, 2011 by the Company's Board of Directors. The members of the Special Committee are Jack M. Kay and W. Thomas Hodgson. The Special Committee continues to be advised by Norton Rose Canada LLP.
Ernst & Young's Interim Report contains a number of findings that are troubling to the Special Committee, including:
There was some degree of confusion with respect to the roles of Andreas and Veronika Kandziora and the two companies with which they are associated, ACM Alpha Consulting Management Est. ("ACM Est.") and ACM Alpha Consulting Management AG ("ACM AG") in their interactions with European investors in Helix securities. For example,
Documents provided to Ernst & Young include July 25, 2010 correspondence from Andreas Kandziora to a potential investor stating that ACM Alpha Consulting Management (www.alpha-cm.com) is the exclusive European representative of Helix BioPharma, responsible for finding/selecting investors willing to buy shares in that company. Their business activity was presented as including share acquisitions (including private placements) and later share disposals for customers. The documents also indicated that all the arrangements are run and supervised by ACM Alpha Consulting Management and further indicate that an investor is bound with ACM under an investment agreement which describes the conditions of participating in the transaction and share of profits depending on the volume of funds invested.
A number of European investors in Helix have confirmed to Ernst & Young that they received contractual promises undertakings or guarantees on the future values of their investments in Helix securities from ACM AG. For example, from documents provided to Ernst & Young:
Correspondence from Andreas Kandziora to a potential investor offered returns based on the amount invested in Helix ranging from 17% returns over 12 months to 70% returns over 24 months.
Promotional documents sent to a prospective investor from ACM Est. stated that under a private placement a guarantor would guarantee the initial capital and that there was an ability to guarantee the minimum return from the investment of 7.5% per year. The documents indicated that there was an option for individual regulation of the amount of the investment, the duration of the contract and the minimum guaranteed return from the investment. They also indicated a profit guarantee in case of investment above 1 Million EUR.
In one investor's contract with ACM AG, the investment of 9,100,000 PLN was guaranteed to return 13,195,000 PLN after one year and 17,290,000 PLN after two years.
Ernst & Young received a copy of a January 5, 2012 email from a bank that has been associated with the Kandzioras, making an offer to two shareholders to buy their Helix shares.
ACM Est. and ACM AG reported purchases of 426,000 Helix shares on the TSX in the period from July 6, 2011 to August 23, 2011 in the 13D report filed on October 3, 2011. Ernst & Young was unable to reconcile all the reported purchases to the TSX daily traded volumes for those days.
To date Ernst & Young has collected information primarily through interviews with Helix management, certain investors and their advisors and documents provided by such persons. Ernst & Young has reported that it has significant work to do to complete its investigation. Its Interim Report is subject to the results of its remaining procedures, and limited by constraints such as the time available, the limited number of European investors who agreed to meet with Ernst & Young and the limited number of documents obtained. Ernst & Young was unable to interview Andreas Kandziora. After arranging a meeting with Andreas Kandziora for January 12, 2012 he cancelled the meeting at the last minute due to other commitments and has not responded to further requests to reschedule the meeting.
The Special Committee informs shareholders that none of the activities set out above have been in any way sanctioned by the Company. These activities, if proven, are improper and inexcusable.
The Special Committee is concerned about the involvement of Andreas and Veronika Kandziora as leaders of the Concerned Shareholders group. After an exchange of letters from counsel to management and counsel to the Concerned Shareholders, the Special Committee has asked the Concerned Shareholders to facilitate an update of their disclosure on the issues and involvement of the Kandzioras in their solicitation. Counsel for the Concerned Shareholders has advised that in their view such an update is not required.
The Special Committee has just received the respondents materials in the application commenced December 7, 2011. The Special Committee is reviewing such materials in conjunction with the Ernst & Young Interim Report. The Special Committee is carefully reviewing next steps.
As stated above, Ernst & Young was engaged to investigate the conduct of certain shareholders and parties related to these shareholders. Their work is ongoing. Ernst & Young is a global leader in assurance, tax, transaction and advisory services, which includes independent investigation and dispute services.
As previously announced, the Special Committee was appointed on November 16, 2011 by the Company's Board of Directors. The members of the Special Committee are Jack M. Kay and W. Thomas Hodgson. The Special Committee continues to be advised by Norton Rose Canada LLP.
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