Aziz Returns Fire in Crypto Board Battle

12 January 2009
Javaid Aziz, the former chief executive of CryptoLogic Ltd., has renewed his intention to overhaul the company's current board after accusing it of "presiding over the significant destruction of shareholder value."

Mr. Aziz, who served as CryptoLogic's C.E.O. between April 2007 and February 2008, took an activist stake in CryptoLogic last month after logging a similar accusation.

In a Dec. 4 letter to the company's chairman, Robert K. Stikmeman, Mr. Aziz made known his intention to take two existing board seats -- one for himself, another for a shareholder to be named later -- if a number of his demands were not met.

CryptoLogic on Dec. 23 returned fire in a stock-exchange statement noting Mr. Aziz's prospective board appointment was not in shareholders' interest and would cause an "unwanted disruption at a crucial phase in CryptoLogic's development."

In a Jan. 9 letter to Mr. Stikeman, Mr. Aziz highlighted the precipitous loss in share value since May 2008 -- 90 percent -- and accused the board of squandering cash, mismanaging expenses and sending mixed messages, regarding growth and profitability, via recent stock-exchange statements.

Mr. Aziz, further, was critical of CryptoLogic's new strategy of rallying around its casino software as well as the company's decision to shut down its poker network and move its licensees to Gtech Corporation's International Poker Network.

"The Board should consider various 'strategic alternatives' including M&A activity," the letter said. "[S]imply focusing in improving the current business does not appear to be a realistic option given the Board and Management's track record of poor execution and the continuing loss of licensees and cash."

Mr. Aziz threatened that if his demands are not met -- he listed 13, including his appointment to the board -- that he would consider launching a proxy contest to replace the board at an extraordinary general meeting for shareholders.

"I hope that this situation can be resolved amicably," the letter said. "However I will not hesitate to take other alternatives in the event that I do not get your cooperation or see any progress in the business."

CryptoLogic, which has yet to respond publicly to Mr. Aziz's latest letter, is holding an investor conference call on Jan. 15.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.