Costa Brava principals, Telos investors ask for outside law firm to review 10-Q

By Lisa Kerner

Charlotte, N.C., Sept. 24 - Telos Corp. independent director Andrew R. Siegel requested a referral of independent securities/corporate counsel to review the company's form 10-Q for the period ended June 30.

Siegel made his request in a Sept. 21 letter to the law firm McGuireWoods LLP. The letter was included in a schedule 13D filing with the Securities and Exchange Commission.

The law firm is acting as Telos' counsel in its litigation against board member Seth Hamot and Siegel, principals of Costa Brava Partnership III, LP which owns 506,811 shares, or 15.9%, of the Ashburn, Va., IT solutions and services provider.

"In view of McGuireWoods' likely ethical conflict of interest in providing me with legal advice while simultaneously and concurrently litigating against me, please provide a recommendation of alternate independent and competent counsel to provide legal advice to me on the important issues raised in this letter," Siegel wrote. He asked for a response by Sept. 25.

It was previously reported that Hamot and Siegel were granted a preliminary injunction preventing Telos from refusing to remit requested documents.

As of Sept. 7, Telos had not provided any of the requested minutes of the audit committee meetings for the periods since director Bernard C. Bailey became chair 13 months ago, the investors said, adding that Telos has also not provided further details of Bailey's "independence" as specified in NASD Rule 4200(a)(15) and requested during an Aug. 9 telephonic board of directors meeting.

Bailey is former chief executive officer of L-1/Viisage, a Telos subcontractor.

On July 5, Siegel sought access to board minutes from 2005 to 2007, a copy of the company's 2007 budget, the company's strategic business plan and the current proxy agreement between Telos, the U.S. Department of Defense and John Porter. Telos was given a deadline of July 25 to hand over copies of the documents or face legal action. Siegel and Hamot then filed suit in the Baltimore Circuit Court on Aug. 3 after the company failed to provide the requested information.

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