In its original complaint filed in Federal district court against Michael Arlen Davis (MAD) and Rudolph Steiner Foundation (RSF), Meridian established the Federal securities law requirement that two shareholders working together on a specific investment are considered a "group" and must make filings fully disclosing the nature of their relationship:
Section 13(d)(3) of the Exchange Act addresses group membership for purposes of Section 13(d) and provides that "[w]hen two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing of securities of an issuer, such syndicate or group shall be deemed a 'person' for the purposes of this subsection." 15 U.S.C. § 78m(d)(3). The SEC regulation under Section 13(d)(3) further provides that "[w]hen two or more persons agree to act together for the, purpose of acquiring, holding, voting or disposing of equity securities of an issuer, the group formed thereby shall be deemed to have acquired beneficial ownership . . . of all equity securities of that issuer beneficially owned by any such persons." Rule 13d-5(b)(1), codified at 17 C.F.R. § 240.13d-5(b)(1).
RSF currently owns 16.2% of Cyanotech. Every single share of stock held by RSF was paid for by Michael Arlen Davis. Every single share held by RSF was placed there at the decision of Michael Arlen Davis. Davis even went so far as to (i) take information learned by him as a director of Cyanotech that a large holder was interested in selling a 9.7% block of shares and (ii) arrange for RSF to acquire that block of stock with (iii) cash provided to RSF by Davis for the specific purpose of acquiring those shares.
It is hard to imagine a clearer case of two persons agreeing “to act together for the, purpose of acquiring equity securities, yet neither MAD nor RSF reported anything about their relationship until it was exposed by Meridian’s investigations in 2016. For six years, the Chairman of the Board of Directors of a public company (MAD) concealed the fact that he was “parking” securities had created a secret “group” with RSF.
Click on image below to read more about Director David L. Vied: Korn Ferry Executive David L. Vied
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