Providence Services says Avalon Correctional made misstatements

By Lisa Kerner

Charlotte, N.C., May 27 - Providence Service Corp. said it believes the proxy statement recently filed by Avalon Correctional Services, Inc. with the Securities and Exchange Commission contained erroneous information that it would like to correct.

The company has filed with the SEC a "non-exhaustive" list of statements Avalon included in its filing that Providence said are incorrect.

According to a schedule 14A filed by Providence, Avalon falsely suggests that:

• The Providence Committee for Accountability includes Providence stockholders other than Avalon and its affiliates and associates;

• The Providence board has increased compensation for executive officers and directors in 2009;

• Providence does not fit within the peer group of companies with which it compares the compensation of Providence's named executive officers;

• Avalon's nominees would provide better oversight of corporate acquisitions and dispositions; and

• One of Providence's directors is not independent.

"We are disappointed that the Avalon Group has chosen to fill their proxy statement with numerous false and misleading statements, innuendo, half-truths, and facts and data taken completely out of context and presented in a false and misleading manner," Providence chairman and chief executive officer Fletcher Jay McCusker said in a company news release.

According to Providence, Avalon used false and misleading statements to buttress its arguments, showing "the level of desperation that they have reached to justify their costly and disruptive proxy contest and to distract our stockholders."

As previously reported, Avalon and its controlling stockholder, Donald C. Smith, want Providence shareholders to elect Michael C. Bradley Jr. and retired U.S. Navy captain Brian T. Costello to Providence's board of directors at the company's annual meeting on June 15.

Providence is asking shareholders to re-elect McCusker and Kristi L. Meints, chairperson of the board's audit committee.

The dissident group, according to Providence, has no relevant experience in the social services industry and its members are all affiliates of Avalon, which operates private correctional facilities for governmental payers in three states.

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.

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

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