Exhibit 17.5
-----Original Message-----
From: wayne@grouppensionplanners.com [mailto:wayne@grouppensionplanners.com]
Sent: Tuesday, April 16, 2013 3:04 PM
To: P. David Newsome
Subject: FW: Response to FTFC 8K Information (Corrected)
Response to FTFC 8K Information:
The information cited in the company 8K is incorrect with regard to mymotivation for my requesting the investigation from Oklahoma SecuritiesDepartment and Oklahoma Insurance Department and for my earlyresignation from the board of directors. As stated in my letter ofresignation and requests for investigations from these regulatoryentities, these requests are to resolve issues that I was unable to getanswers to on issues that arose during my tenure as a board member.
During the board meeting held in August 2012 which our company generalcounsel attended, I was never able to get a proper answer on whether theinital placing of the shares by Gregg Zahn with family members forrepurchase at a later date was a violation of any state or federalstatue or rule relating to insider trading or other law. While GreggZahn did reveal the purchase in required corporate filings after hepurchased them at ten cents per share, he did not reveal the option topurchase these shares from individuals when the shares were initallysold to family members due to his insider position at FTFC. At the timeof the inital sale to these individuals Mr. Zahn was only employed byFTFC only as Director of Training and Recruitment. Mr Zahn has failed toexplain to the board or proper authorities how this sale wasaccomplished since he was not an officer of the company at the time andwhether company officers approved of these sales.
The issue with Mr. Zahn attempting to sell secondary shares which hadbeen recently purchased from family members for ten cents per share atthe $7.50 inital offering for $7.50 per share (similar to what accordingto documents transpired in Montana and for which he was charged) andstating in his letter to the board that this was approved by theOklahoma Securities Department also merits mention in the documents tobe filed as a reason for my resignation and a call for investigation byOSD. The company 8K reply only mentions the circumstances surroundingthe actual re-purchase of the shares by Mr. Zahn and does not mentionMr. Zahn's testimony to directors that occurred in June 2012 of hisattempt to place these shares with family members and others for theexpress reason of being able to repurchase them following the finalityof his divorce to replenish his shares.
I also feel that the minutes of the meeting (particularly during thepast year) are not factual with respect to occurances and details of theactual meetings that have occurred. They have oftentimes beensubjectively altered in statements and actual transcribed events todeflect from the true occurances in the meetings. I fear that this willcontinue in the future without the requirement that these meetings berecorded.
The information that I obtained via the open records request to theOklahoma Insurance Department revealed information from his deferredprosecution agreement from felony fraud and other charges that I had notbeen given as a board member and that I feel would have affected mydecisions regarding elevating Mr. Zahn to his current position asPresident and Chairman of the Board and also the level of compensationthat has been approved by the board including bonuses. It is also theprimary reason that I submitted my resignation prior to my term on theboard ending next month.
The information in the company's 8K is also incorrect with regard to myand other board members supporting another individual as Chairman of theBoard at the meeting held in May 2012. Our goal at that time was tofollow the lead of many companies that have chosen to keep the positionsseparate for better company oversight and to keep one individual fromobtaining too much control of the company. This proposal was notforwarded by me but by other members of the board, several of which havenow also resigned.
I feel that had the board known of Mr. Zahn's past problems withregulators, it would have not allowed him to take total control of thecompany with such limited board oversight and membership. The board hasnow lost four board members over the past year, none of which have beenreplaced. The board now also lacks much of the independent oversightthat it had at its formation due to the actions of Mr. Zahn inforwarding and helping to pass amendments to eliminate the requirementthat only independent directors serve on the Compensation and NominatingCommittees.
The Compensation Committee has not been forthcoming with the informationit promised to board members at the last meeting regarding justificationof Mr. Zahn's recent compensation increases which have been increasedthree times in the past year. One area of major concern is the bonusstructure revealed by Compensation Committee Chairman George Peintner atthe March board of directors meeting. In addition to Mr. Zahn's threeyear rolling contract with golden parachute provisions, Mr. Zahn willnow also get a 6% annual increase in salary and a portion of companyrevenues. Mr. Zahn's bonus structure revealed by Chairman Peintner willalso reward him based on company asset increases which are not anindication of increases in shareholder equity or company profitability.Zahn has already discussed an option to buy under performing assets fromother companies with the current board membership which could bolstersuch a personal bonus but possibily be detrimental to the company.
As I did not ask to be reappointed to the board for another term andafter reviewing the information from OID, am submitting my resignationfrom the board early, the reappointment issue mentioned in the company's8K has no bearing in my decision or board resignation. My main purposeis to ask for reforms and answers to the questions I have posed to theOSD and OID. I would ask that the letters to these regulators beincluded as part of my response. My focus as a board member has alwaysbeen the protection of the shareholders of FTFC and these efforts are tothat purpose alone..
Sincerely,
Wayne Pettigrew
Outgoing Board Member - FTFC