An anonymous letter sent to some shareholders of PrepaYd Inc. appears to have ties to a California Department of Corporations subpoena the prepaid card company received a year ago. And it has the company's CEO fuming.
"It's just a personal attack on me by a former employee," Bruce Berman, who is also the company's chairman, said in an interview.
Because the letter mentions the subpoena, Berman said he felt he had to make it public.
In a July 16 news release, the Henderson, Nev.-based company, formerly Prepaid Card Holdings Inc., notes that about a year ago the California Department of Corporations presented a subpoena for certain books and records of the public company, whose shares sell over the counter. PrepaYd 's securities counsel believed it was a routine investigation, and the company responded accordingly, the release states.
"It was a year old and stagnant, and we figured it was resolved," Berman said in the interview regarding the investigation. "But until something is officially resolved, it's not resolved."
"The outcome could have an adverse effect in the company," PrepaYd said in the release, without explaining the specifics of the letter. "Besides alerting the company, the anonymous letter was meant to cause the company harm," the release says.
In the interview, Berman said he knows who sent the letter based on "evidence," though he would not elaborate. "I plan to sue when the time is right, and the time is not right," he said.
Berman said the company's board also was aware of the subpoena.
The letter focused on the parent company and not on any subsidiaries, such as PrepaYd Wireless Inc. or Bank Freedom, Berman said. PrepaYd was never involved controversial matters such as assessing monthly fees or supporting payday loans, he said.
"We're the good guys in prepaid," he said. "The company has a great reputation."
Bank Freedom and Fidelity National Services Inc., or FIS, in April agreed to a multiyear arrangement to allow Bank Freedom prepaid cardholders access to a smartphone payment application.
In a separate announcement July 17, PrepaYd announced that Berman has reduced his salary voluntarily by just more than 50% effective July 15, the third time he voluntarily reduced his future salary by a similar percentage. In 2010, Berman reduced his annual salary to $114,653 from $297,500, and in 2009 he reduced it to $72,292 from $297,500.
Berman worked from the company's inception in 2007 through Dec. 31, 2008, for $1, according to a company news release.
In the interview, Berman said the pay cut has nothing to do with the anonymous letter or the California investigation. "I'm just trying to explain to people that I can put my money where my mouth is," he said.
In the release, he said he took the pay cut "to boost shareholder confidence and value."
"Anyone that has ever spoken to me knows that since day one I have said over and over I am in this for a stock play, not a job or salary," Berman said in the release. "I had a profitable business (Berman Investment Group) that I wound down to start what is now PrepaYd Inc. I made more income in one year in my old business than I have been paid in salary by PrepaYd Inc. in the approximate five years combined since I started what is now PrepaYd Inc."
Berman also reduced his paid vacation to four weeks from eight weeks per year, and he agreed that any unused vacation or sick days would be on a use-it-or-lose-it basis.
He also agreed to leave his salary at the reduced level until the company earns $2 million or more in EBITDA in any 12-month or less period. Berman reserved the right if the company or any of its subsidiaries are sold or acquired to negotiate his future salary with the purchaser if it desires to keep him on.