Parking REIT Replaces CFO and Leaves Blue Vault Wondering “What’s Going On?”
June 6, 2018 | James Sprow | Blue Vault
On May 31, 2018, the Board of Directors of The Parking REIT, Inc. a public non-traded real estate investment trust (“REIT”), approved the non-renewal of Chief Financial Officer (“CFO”) Ed Bentzen’s employment agreement. Mr. Bentzen and the Company agreed that June 1, 2018, would be Mr. Bentzen’s last day as Chief Financial Officer of the Company.
On May 31, 2018, the Board appointed Brandon Welch as the interim CFO of the Company effective as of the close of business on June 1, 2018. Mr. Welch, age 35, has been employed with MVP Realty Advisors since the inception in 2012 of MVP REIT, Inc., a predecessor to the Company.
Mr. Welch is the son-in-law of Michael Shustek, the Company’s Chief Executive Officer.
The Company has yet to file form 10-K for 2017 and filed a form NT 10-Q on May 16, a notification of inability to timely file Form 10-Q, the quarterly report for Q1 2018.
Additionally, on May 29, 2018, The Parking REIT’s board of directors suspended its share repurchase plan, other than for repurchases in connection with a shareholder’s death. In accordance with the share repurchase plan, the suspension of the share repurchase plan will take effect on June 28, 2018.
As previously disclosed in the Notification of Filing on Form 12b-25 filed by The Parking REIT, Inc. with the Securities and Exchange Commission (the “SEC”) on April 3, 2018, in February 2018, the Audit Committee of the Company’s Board of Directors engaged independent legal counsel to conduct an internal investigation arising from the Audit Committee’s receipt of allegations from an employee of MVP Realty Advisors, LLC, the Company’s external advisor (the “Advisor”), regarding possible wrongdoing by the Company’s Chairman and Chief Executive Officer, Michael V. Shustek, relating to: (i) potentially inaccurate disclosures by MVP American Securities, the broker-dealer affiliated with the Advisor, to the Financial Industry Regulatory Authority, Inc. (“FINRA”) relating to total underwriting compensation paid by the Advisor and its affiliates (other than the Company) in connection with the initial public offerings of MVP REIT, Inc. and the Company and (ii) potential inaccuracies in personal financial statements of Mr. Shustek that were provided to one or more of the Company’s lenders in connection with mortgage loans or guarantees where Mr. Shustek is a personal non-recourse carve-out guarantor. The allegations of possible wrongdoing did not involve the Company’s financial statements or accounting procedures. The Audit Committee commenced the internal investigation and engaged independent legal counsel promptly upon becoming aware of the allegations.
On April 27, 2018, the Audit Committee concluded its internal investigation and reported to the Board on the matters raised by the Advisor’s employee as well as certain recommendations made by the Audit Committee. Based upon the information made available to it, the Audit Committee determined that Mr. Shustek did not exercise proper judgment and appropriate oversight in connection with the initial submission of underwriting compensation information to FINRA and personal financial statements to the Company’s lenders, which resulted in the submission of inaccurate information to FINRA and the Company’s lenders. As part of its analysis, the Audit Committee also took into consideration the fact that (i) MVP American Securities had corrected the information provided to FINRA regarding underwriting compensation before the Advisor’s employee made the report to the Audit Committee and (ii) Mr. Shustek provided corrected updated personal financial statements to the Company’s lenders upon being made aware of the inaccuracies in the previously submitted personal financial statements.
On April 29, 2018, the Board received a letter from Allen Wolff pursuant to which he resigned as an independent director from the Board, effective immediately. Prior to his resignation, Mr. Wolff was a member of the Audit Committee.
In his resignation letter, Mr. Wolff expressed concern that his philosophy and vision for the Company are not in line with the thinking of a majority of the Board.
Although Mr. Wolff’s resignation letter did not otherwise specify the reasons for his resignation, the Company believes that Mr. Wolff’s resignation primarily resulted from Mr. Wolff’s disagreement with the Board’s decision, upon the conclusion of the Audit Committee’s investigation to delay assessing the bifurcation of the chairman and chief executive officer roles – Mr. Wolff, instead, would have voted for the immediate bifurcation of these roles, and would have requested that Mr. Shustek step down as chief executive officer and remain as chairman of the Company.
On May 31, 2018, the Board of Directors of the Company appointed Bill Wells to serve on the Company’s Board to fill a vacancy created by the resignation of a previous Board member. Mr. Wells, age 65, from 1990 until April 2018 was the Las Vegas Office Managing Partner and Audit Partner of RSM US LLP, an international audit, tax and consulting firm (“RSM”). RSM was previously engaged as the Company’s auditor on May 19, 2017, and was dismissed on April 29, 2018.
RSM was engaged to audit the Company’s financial statements for the year ended December 31, 2017, however, the audit was not completed, and no audit report was ever issued by RSM to the Company.
On April 30, 2018, the Company re-engaged RBSM LLP (“RBSM”), the Company’s prior independent registered public accounting firm, effective immediately. RBSM previously served as the Company’s independent registered public accounting firm until the Company’s dismissal of RBSM on May 19, 2017. During the Company’s prior engagement of RBSM, RBSM reported on the Company’s financial statements for the period from May 4, 2015 (date of inception) through December 31, 2015, and for the year ended December 31, 2016.
All of this has left Blue Vault wondering:
| • | Why hasn’t the Company filed an annual report (10-K) for 2017? |
| • | Why hasn’t the Company filed a quarterly report (10-Q) for Q1 2018? |
| • | What is the relationship between the Company’s previous audit firm RSM US LLP and its current audit firm RBSM LLP, and its new board member who was, until April 2018, Managing Partner and Audit Partner of RSM US LLP? |
| • | Was the termination of CFO Ed Bentzen and the appointment of the CEO’s son-in-law as the interim CFO related to the receipt of allegations from an employee of MVP Realty Advisors, LLC, the Company’s external advisor, regarding possible wrongdoing by the Company’s Chairman and CEO Michael Shustek? |
According to a January 11, 2018, SEC filing, Michael Shustek, through a company called Vestin Realty Mortgage II, owned 359,546 shares of common stock, representing approximately 5.62% of the shares of common stock of The Parking REIT.
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