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Corporate governance issues at Aphria (NYSE: APHA) and Namaste (TSXV: N)


Recently, I came across some items that made the hair on the back of my neck stand up. It involved three companies that are experiencing problems relating to corporate governance: Aphria (NYSE: APHA) and Namaste Technologies (TSXV: N).

First the Aphria report done by a committee of independent directors and consultants who found that:

  1. The assets acquired in Argentina, Colombia and Jamaica were verified to be in place.

  2. Comprehensive site reviews to confirm the existence of the assets in Colombia and Jamaica as well as the contractual and permitting arrangements in Argentina.

  3. The prices paid were determined to be in on the high side of an acceptable range.

  4. Certain non-independent Directors had conflicting interests in the acquisition that were not fully disclosed to the Board.

  5. Changes are recommended to corporate governance procedures to ensure this does not happen again.

To my way of thinking, this is not close to acceptable. You do not need corporate governance procedures to ensure Directors are not engaged in self-dealing in company business transactions. You need honest directors. If more than one director was involved, the Aphria corporate culture must have allowed and perhaps encouraged such activity.


Vic Neufeld, who was the CEO of Aphria at the time, promised a point by point rebuttal of the questions raised in the Hindenburg report. This has not been done and if the regulatory bodies continue to sit on their hands and do nothing, it could well set a precedent for someone in the future to describe an acquisition as having a Board member who wasn’t, as engaging a high level expert who may be fictitious, claim to have a facility at an address that does not exist and non-independent Directors with conflicts of interest. Imagine if this was a junior resource company. Do you think they would let it slide?


Regulators should know allowing such actions to take place without consequences threatens the integrity of the public markets. Arguing the self-dealing director(s) problem will be rectified because the board is changing to all independent members so all of the non-independent members who engaged in self-dealing will be gone is too subtle for the public. The integrity of the financial markets must not only be protected, it must be seen to be protected.


I always seem to be offering Namaste and its management free advice that they don’t accept. This time I also have advice for Namaste shareholders. I saw Sean Dollinger interviewed about his problems at Namaste. My advice? If you are really going to challenge the Board of Director’s decision, stop talking in public. If you get a lawyer, I am sure he or she will tell you the same thing.


My advice to shareholders? There’s an old saw, “Con me once, shame on you. Con me twice, shame on me.” It seems clear that Namaste’s Board of Directors concluded that Sean Dollinger was caught with his hand in the cookie jar. If you are still a shareholder, don’t get drawn into the controversy. Support your Board of Directors. If Dollinger has a case, let him make it in open court for a judge and/or jury to decide.


Part of my outlook for 2019 included an environment of an increasing number of scandals and that is sure happening. I only hope the regulators wake up and start going their jobs.

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