Shares in Unilife (NSDQ:UNIS) are off 7% this week after the company said its investigation into former CEO Alan Shortall turned up “material weaknesses” in its bookkeeping procedures that will require it to restate some of its financials.
Shortall, who left the company in March along with COO Ramin Mojdeh, was elevated to chairman in 2013. In May, the company’s stock tanked after it revealed possible company policy and legal “violations” by Shortall. Unilife said in July that its investigation found that Shortall and ex-chairman Jim Bosnjak (who retired from the board in August 2015 and was succeeded by Shortall), used the company as a sort of bank to finance Shortall’s move to a new home, personal expenses and loan payments.
Shortall also apparently expected Bosnjak to pay him “substantial” kickbacks, Unilife said in a regulatory filing.
“Mr. Shortall and Mr. Bosnjak failed to disclose to the company $170,000 in personal payments during 2011 from Mr. Bosnjak to Mr. Shortall which payments did not involve company funds, and also failed to disclose that, during the period from 2010 to Mr. Bosnjak’s resignation, Mr. Shortall, for reasons that the company has been unable to determine, expected to be paid or loaned substantial amounts of money by Mr. Bosnjak,” according to the filing.
Unilife also said that Shortall withdrew a total of $340,000 from the company’s coffers 5 to 36 days before he paid the money back in, which it plans to count as loans. Shortall deposited and withdrew another $253,000, but paid the money in within a day of it being disbursed back to him, according to the filing.
In June 2015 Shortall put nearly $2.3 million into Unilife’s bank account, then directed Unilife to disburse nearly $1.4 million to close his house purchase in July of that year; the balance was paid back to Shortall, the company said.
Although none of these incidents involved financial losses for the company, there’s another $150,000 in alleged loan payments and personal expenses Unilife said it paid out to Bosnjak and Shortall. The former CEO had the company put up $62,000 the company believes was used to pay off the interest on a 3rd-party loan Bosnjak took out on his UNIS shares.
“The company believes such fund transmittals constitute loans from the Company to Mr. Bosnjak, and the Company is evaluating potential actions to recover these funds,” according to the filing, which also accuses Shortall of reimbursing himself for some $88,000 in personal expenses, which it demanded he repay.
The fallout from the probe also befouled chief accounting officer Dennis Pyers, the company said, who was removed from his post and named “senior advisor, special projects.” Unilife said this week that it will re-file its financial statements for its fiscal 2015 year and its quarterly reports for its fiscal 2015 1st and 2nd quarters.
“As a result of the investigation, management has also determined that there were material weaknesses in the company’s internal controls over financial reporting and disclosure controls and procedures,” Unilife said, noting that it will also incur charges for its move to focus on the wearable injector market during fiscal 2016.
UNIS shares were down by -7.0% as of yesterday’s close at $2.79 apiece, but stage a slight rally this morning to $2.80 per share. The stock is off -42.0% this year.
