Three former board members of Cano Health who alleged the company engaged in insider loans and transactions with a conflict of interest are now calling on the company to reopen the window for director nominations, saying they have received “an outpouring of support” from other shareholders.
Barry Sternlicht, Elliot Cooperstone and Lewis Gold, who collectively hold 36% of Cano’s stock and resigned from the board at the end of March, had previously called for the ousting of CEO Marlow Hernandez for what they called poor corporate governance.
In their letter, the former board members took issue with business transactions between Cano and members of the Hernandez family, including $23 million paid to the CEO’s father for general contracting work, and $8.5 million to a dental care company owned by Hernandez’s wife.
The investors now want the board to “heed the will of shareholders,” reopen nominations and bring forth other proposals — including ones to oust one or more current board directors.
“While we would typically respect the bylaw provisions around the timing of nominations and proposals, this is an extremely unique situation that justifies extraordinary action,” they wrote in a Monday statement regarding an extended nomination window.
Meanwhile, Cano sent a letter to shareholders Monday criticizing the former board members and laying out an action plan “to deliver continued growth in 2023 and accelerate our path towards achieving positive free cash flow.”
The Florida-based chain, which provides primary care for seniors, was founded in 2009 and went public in 2021 through a $4.4 billion merger with a special acquisition company.
But the company has faced financial difficulties, including a decline in its stock value over the past year. In addition, Cano announced this year that it would significantly reduce investments after losing $426 million in 2022.
In its letter, the company said the three former board members had opportunities to perform diligence when initially investing and during the SPAC transaction, and that the previous board members had supported decisions they now objected to, such as expanding the company’s reach outside of Florida.
“Rather than work constructively with our current Board to realize the full potential of Cano Health, the former directors are now selectively pointing to past decisions that they themselves architected, supported, and approved, in a manner that we believe is designed to serve their own personal agendas,” according to the letter.
Cano also said Monday it would be separating the roles of chairman and CEO. It appointed Solomon Trujillo, lead independent director, as non-executive chairman of the board.