Revisionist history at work at Pacific & Western Bank

It usually takes a few years for the gremlins of revisionist history to get to work. In our “just-in-time” world, perhaps it is now a matter of months.

You may recall the name of David Taylor. He was once the Chairman and CEO of Discovery Air (DA.A:TSX), and still hangs his hat at Pacific & Western Bank (PWC:TSX). He ran into rough water with many on Bay Street last year (see prior posts “The perils of taking stock when you sell” April 29-08, “Governance Gods shine on Discovery Air” September 18-08), and was finally cut loose by the Discovery Board of Directors in September 2008.

For the folks who read the London Free Press, none of this ever happened. Here is Mr. Taylor’s quote from last Friday:

“When we were the managers of it (Discovery Air), we were doing quite well,” Taylor said. “When our contract with them ended in October, the stock went down.”

When Mr. Taylor’s Discovery acquired Wellington Financial Fund II portfolio co. Top Aces in August 2007, Discovery shares were trading around $1.75, and the unsecured debentures were trading at par. By the time the Discovery Board got around to “terminating” Mr. Taylor, the shares had fallen to $0.44 and the debs could be had for maybe $0.80.

Which means that Discovery shares fell 75% during the short time that we were paying attention. Although they did continue to drop another twenty cents thereafter, this is not unusual when a CEO is “terminated” by the Board of a small cap company.

As for the “our [management] contract ended in October” spin doctoring, the original September 2008 Free Press interview regarding Mr. Taylor’s termination was quite different in substance: “‘It was basically a difference of opinion between myself and the board of directors and the board chose to terminate me,’ Taylor said yesterday.”

No mention was made last September of a contract coming to an end, and the termination press release was pretty clear cut. Which won’t stand in the way of the revisionist historians, mind you.

Fortunately you all can rely on us to keep an eye on such things.

MRM
(disclosure – our Fund II owns shares in DA; I own shares and debs in DA)