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Telit Communications – Mr Fat Katz unusual remuneration arrangements

By Tom Winnifrith, The Sheriff of AIM | Sunday 13 August 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

After today's complete bombshell which shows that Telit (TCM) is a Globo style fraud and thus utterly worthless what follows may be a tad academic. But, none the less, it is yet another Red Flag which we all should have noticed earlier. Reading through the 2016 annual report of Telit it is apparent that Mr Fat Katz, sorry Mr Oozi Cats, had two unusual remuneration arrangements.

Both he and the CFO (now also acting CEO) Mr Fait were paid in advance on account for their yearly variable compensation as disclosed below:

“Mr. Cats and Mr. Fait are paid an advance payment on account of the yearly variable compensation (“Advance Payment”), based on the half-year results. Mr. Cats and Mr. Fait shall return to the Company any amount received as Advance Payment that exceeds the annual bonus based on the audited annual financial statements.”

For a group which was consistently increasing the delay in payments to trade creditors to manage its cashflow surely it shows very poor form for the two most senior directors to request upfront payment for a proportion of bonuses that are supposed to be based on year end results. It probably meant that non-executive directors also found it more difficult to reduce the actual year-end bonuses because they might have been forced to request a proportion of money advanced to be repaid.

Presumably based on interim losses no such advance payment was due for 2017.

Secondly, Mr Fat Katz also received payment for when he was so busy driving forward the Group that he couldn’t take his full holiday entitlement as disclosed in footnote 1.

“Salary in 2016 includes $126,000, as payment for unused vacation days (2015: $222,000).” Whatever, just how many vacation days was this dude allowed?

This sort of behaviour is very peculiar indeed and, as I said, a big red flag. But after the bombshell I served up overnight it is merely icing on the cake. Telit is toast.

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