2017 04 27 - Aurelius Equity Opportunities SE & Co KGaA: Can Dirk Markus be trusted? Part I

GOTHAM CITY RESEARCH LLC

Aurelius Equity Opportunities SE & Co KGaA:

Can Dirk Markus be trusted? Part I

Source: Aurelius’ website and Annual Reports

Gotham City Research was unable to verify that Dirk Markus holds a PHD from Harvard University; in fact, we were unable to verify that Dirk Markus holds any degrees from Harvard "Someone who lies about the little things will lie about the big things too." - Terry McAuliffe

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Table of Contents I. II. III. IV. V. VI.

Disclaimer Was Dirk Markus awarded a PHD by Harvard University? Aurelius’ Dirk Markus is not listed in the Harvard Alumni Directory Dirk Markus is not listed as an honorary degree recipient Was Dirk Markus a “Research Fellow” at Harvard? Harvard credential misrepresentations: editorial mistakes?

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Was Dirk Markus awarded a PHD by Harvard University? Gotham City Research believes that Dirk Markus holds no PHD from Harvard University Aurelius claims that Dirk Markus was awarded a PHD by Harvard University:

Gotham City Research believes that Dirk Markus holds no PHD from Harvard University; in fact, we believe that Dirk Markus holds no degrees from Harvard at all for the following reasons:    

Aurelius’ Dirk Markus is not mentioned in Harvard’s alumni directory. Student Clearinghouse was unable to verify any Harvard University degrees for a Dirk Markus. Dirk Markus is not mentioned among those listed as honorary degree holders. We contacted Harvard and the contact person who we spoke with is unaware of any official or unofficial joint PHD programs between St. Gallen and Harvard.

Does management dishonesty even matter for long term shareholder value? If Aurelius’ shares were trading at a discount to NAV or book value, some would argue that management dishonesty is “priced in” to the stock price. Based on our study of suspect financial companies, the “dishonesty is priced in” thesis tends not to work well when investing in financial companies. For example, see the case of Home Capital Group, a Canadian financial company, whose shares declined -65% yesterday. American short sellers have alleged the company’s management is dishonest and engages in suspect practices. A high dividend yield has not prevented the stock from declining -85% in 1 year. Unlike Home Capital Group, Aurelius’ shares currently trade at a premium to NAV, a large premium to book value, and a very large premium versus its European peers. The market does not seem to be pricing in any “dishonesty discount” to Aurelius’ share price. We would understand if Aurelius and Dirk Markus were exemplary in their corporate governance, disclosures, and integrity. That doesn’t seem to be the case, however; to the contrary, the list of concerns is only growing:     

Why does Aurelius and/or Dirk Markus misrepresent Dirk Markus’ academic credentials? Why is Dirk Markus’ past role as a senior executive at Arques, omitted from his biographies? Who is Aurelius’ CFO? Why did some of the bank analysts believe Dirk Markus is the CFO? How many shares does Dirk Markus own? Why does he refuse to disclose this information? Is Aurelius attempting to sell SECOP to Nidec at a 30%-50% discount to its SECOP NAV valuation? If so, shouldn’t a similar discount be applied to Aurelius’ entire NAV? Has Aurelius historically generated substantial profits from asset stripping?

If Dirk Markus were lying about the small things, how can he be trusted – as the CEO of Aurelius – to tell the truth about more important matters? Page 4 of 9

Dirk Markus is not listed in the Harvard Alumni Directory According to the online Harvard Alumni directory, Aurelius’ CEO, Dirk Markus, is not listed:

The gentleman listed in the directory, Dirk Dubber Markus, is not Aurelius’ Dirk Markus. Aurelius’ Dirk Markus, is Dirk E. Markus, not Dirk Dubber Markus. Also, there is no evidence that Aurelius’ Dirk Markus has any ties to Canada. Finally, Aurelius’ Dirk Markus has never represented attending Harvard as an undergraduate (the ‘AB’ designation, shown above, denotes an undergraduate).

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The National Student Clearinghouse was unable to verify a degree for Dirk Markus We contacted Harvard University (the Registrar’s Office). We were instructed to visit the National Student Clearinghouse ( http://www.studentclearinghouse.org/ ). We were told that we would be able to verify whether or not Dirk Markus earned a PHD from Harvard University, through this service. The National Student Clearinghouse was unable to verify a degree for Dirk Markus:

Maybe Dirk Markus earned a PHD from a joint program between St. Gallen and Harvard? One could interpret (below, provided from Aurelius’ Annual Reports)

to mean that Dirk Markus earned either two separate PHDs from both institutions (which is unusual), or that he earned one PHD through some kind of joint program, between St. Gallen and Harvard.   

Based on our prior findings, there is no evidence that he earned ANY degree from Harvard. According to Harvard’s Office for Visiting Fellows/Special Students, there is no, and never has been, any formal nor informal programs between St. Gallen University and Harvard University. We searched, via google search engine, for “Harvard St. Gallen” and found no evidence of any joint programs. Page 6 of 9

Dirk Markus is not listed as an honorary degree recipient Given that Aurelius claims its CEO Dirk Markus was “awarded” a PHD from Harvard University, one might think Dirk Markus may have not earned a PHD from Harvard; rather, he was honored with one. The problem we find with this theory - Harvard University publicly lists honorary degree recipients and Dirk Markus is not listed as a recipient:

For the full list of honorary degree recipients (includes the likes of Winston Churchill, Albert Einstein, etc, not people alleged to raid pension funds): http://www.harvard.edu/oncampus/commencement/honorary-degrees

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Was Dirk Markus a “Research Fellow” at Harvard? According to the Dirk Markus CV listed on the Berentzen website, Dirk Markus does not hold a PHD from Harvard; rather he was a “Visiting Research Fellow” at the Harvard Business School:

Source: http://www.berentzengruppe.de/fileadmin/dateien/Investoren/Die_Aktiengesellschaft/Lebenslaeufe_ARMitglieder/AR_Lebenslauf_Markus_2017_EN.pdf

Is this even correct? It is our understanding that “Research Fellow” at Harvard Business School is a title typically reserved for a faculty appointment; we were unable to find any records of Dirk Markus ever having any faculty position at Harvard. Sources: http://www.hbs.edu/businesshistory/fellowships/Pages/default.aspx http://www.hbs.edu/ra/Pages/default.aspx Page 8 of 9

Harvard credential misrepresentations: editorial mistakes? Aurelius referred to accounting misstatements that we identified, in its audited financial statements, as mere “editorial mistakes”:

Source: http://aureliusinvest.com/statement_aurelius_gotham.pdf Could it be that the Dirk Markus credential misrepresentation is an “editorial mistake” as well? We think not, for the following reasons:    

Dirk Markus’ biography, in Aurelius’ Annual Reports, was changed three times between 20082010 (see for yourself; the biographies were very clearly edited in those 3 annual reports). The Harvard misrepresentation is on Aurelius’ website (the English version). The Harvard misrepresentation is found in every Annual Report since 2009. The C.V. on the Berentzen website makes an inconsistent (and similarly dubious) Harvard claim; rather than “Harvard PHD”, Dirk Markus was a “Visiting Research Fellow”

How would a mere “editorial mistake” explain such a persistent misrepresentation? Aurelius’ behaviors would not be tolerated, if its shares were listed on the US share exchanges In our opinion (based on our experience with US share markets, understanding of its rules/regulations and US market history), Aurelius and its management’s behaviors would not be tolerated in US markets. The following behaviors lead us to this belief:      

Dirk Markus would not be allowed to refuse disclosing his share ownership in Aurelius shares; also, his claim that he could not disclose due to “legal reasons” might itself be legally tested; Aurelius’ inconsistent (and in our opinion, contradictory) claims about who their CFO is, would lead to some serious regulatory scrutiny from the SEC; The omission of Dirk Markus’ stint at Arques Industries might be deemed as a material omission; Aurelius and/or Dirk Markus’ credential misrepresentations would pressure Markus to resign; The allegations of asset stripping would be well scrutinized by the US media, various regulators, and possibly US market participants; there would be no way to hide from the truth; The SEC would not tolerate irregularities/misrepresentations explained as “editorial mistakes”. Page 9 of 9