Providence Service won't give Avalon Correctional access to books, records under Delaware law

By Lisa Kerner

Charlotte, N.C., Feb. 18 - Providence Service Corp. denied Avalon Correctional Services, Inc.'s request to inspect and copy some of the company's books and records under section 220 of the Delaware General Corporation Law, as amended.

According to a form 8-K filed with the Securities and Exchange Commission, Providence believes that Avalon's demands are "extraordinarily overbroad, patently inappropriate, unduly burdensome and devoid of a proper purpose" and accused Avalon of conducting a "fishing expedition."

"In addition, the company believes that your inclusion in the demand letter of false and misleading statements, and the affirmation under oath that such statements are true and correct, renders the demand letter defective ab initio," a letter from Providence's attorney to Avalon president and chief executive officer Donald E. Smith said.

Previously, Providence likened Avalon's recently announced planned consent solicitation to a "wolf in sheep's clothing," suggesting that Avalon is more interested in taking over the company than with improving corporate governance.

Providence CEO Fletcher McCusker, in a prior news release, noted Avalon's "colorful history as an operator of a water park, de-certified mental health facilities and community corrections programs and its adversarial relationships with various regulatory and payer organizations."

In December, Providence announced it had adopted a shareholder rights plan that gives its shareholders rights to purchase shares of newly created series A junior participating preferred stock. The rights will be triggered if a person becomes the beneficial owner of 20% or more of Providence's outstanding common stock, other than by a qualified offer.

Oklahoma City-based Avalon owns and operates private community correctional facilities and correctional programming.

Providence is a Tucson-based provider of home- and community-based social services to government-sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.

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