NEW YORK, NY — (MARKET WIRE) — 01/10/05 — Prospect Energy Corporation (NASDAQ: PSEC)(the “Company”) announced today that it has expanded its professional teamto enhance its financial and compliance capabilities, that KPMG LLP(“KPMG”) has resigned as the Company’s independent auditor, and that theAudit Committee of the Board of Directors of the Company (the “AuditCommittee”) has approved the engagement of BDO Seidman, LLP (“BDO”) as itsindependent auditor.
The Company announced that Eugene S. Stark has joined ProspectAdministration, LLC to serve as Chief Financial Officer (“CFO”) of theCompany effective January 3, 2005, and that William E. Vastardis, Co-ChiefExecutive Officer of EOS Compliance Services LLC, has been retained toserve as Chief Compliance Officer (“CCO”) of the Company and ProspectCapital Management, LLC, its investment adviser, effective January 4, 2005.The Company and Prospect Capital Management have each contracted with EOSCompliance Services LLC for Mr. Vastardis’ services as CCO, as well as forother compliance-related services that may be provided by EOS ComplianceServices LLC. Mr. Vastardis will continue to perform his duties for EOSCompliance Services LLC and EOS Fund Services LLC as described below.
Mr. Stark (age 46) has over 20 years of experience with investmentcompanies registered under the Investment Company Act of 1940. Mr. Starkwas employed by Prudential Financial, Inc. during the last 17 years, mostrecently serving as Vice President of Finance in its annuity business.Prior to that, he was principally associated with Prudential’s retailmutual fund and investment products business, serving in a series offinancial roles, including Treasurer of many of Prudential’s investmentcompanies. Before joining Prudential, Mr. Stark spent five years withDeloitte & Touche. He received his undergraduate degree in accounting fromRider University, his Masters in Business Administration from RutgersUniversity and became a Certified Public Accountant in New Jersey in 1984.
Mr. Vastardis (age 49) is a founder and President of EOS Fund Services LLCand Co-Chief Executive Officer of EOS Compliance Services LLC. Mr.Vastardis has over 26 years of experience in fund oversight andadministration. Mr. Vastardis founded EOS Fund Services LLC in 2003 andEOS Compliance Services LLC in June 2004. EOS Compliance Services LLCperforms chief compliance officer services for various registered mutualfunds and registered investment advisers with total assets in excess of $15billion. Prior to founding EOS Fund Services LLC, he managed a third-partyfund administration firm, AMT Capital Services Inc., which was acquired byInvestors Bank & Trust Company in 1998. Mr. Vastardis continued in therole of Managing Director at the renamed Investors Capital Services untilhe departed to found EOS Fund Services LLC. Prior to AMT Capital, Mr.Vastardis spent 14 years at The Vanguard Group, where he most recentlyserved as Vice President in charge of the $10 billion Private Label Groupthat handled the administration of over 45 outside funds. Mr. Vastardis isa graduate of Villanova University.
“We are delighted with the addition of Gene and Bill to our team,” saidJohn F. Barry, Chairman and CEO of the Company. “These individuals bringsignificant industry experience that will enhance our ability to serve ourshareholders.”
As previously disclosed by the Company in its quarterly report on Form 10-Qfiled on November 12, 2004, the Company received a letter from Mark Witt,the former CFO of the Company, and subsequently an investment professionalof Prospect Capital Management, alleging unspecified “improprieties.” TheAudit Committee directed the Company’s outside counsel handling Mr. Witt’searlier termination to look into his claims and also retained the law firmof Willkie Farr & Gallagher LLP to investigate his and any other claims,including the allegations being raised by Mr. Witt and the Company’sprevious CCO and any other claims arising in the course of theirinvestigation. The Audit Committee has preliminarily concluded that noneof the allegations made by Mr. Witt or the Company’s CCO, or theinformation subsequently learned in the course of this internalinvestigation, reflects adversely on the fairness or reliability of thefinancial statements of the Company. The Audit Committee has furtherconcluded that, on a preliminary basis, in connection with thoseallegations investigated by Willkie Farr, there is no evidence of fraud bymanagement or material deficiencies in connection with the Company’s publicdisclosure practices.
On January 4, 2005, KPMG notified the management of the Company and theAudit Committee that it had decided to resign as the Company’s independentauditors because, based on their assessment of available resources and theexpected future service needs of the Company, KPMG had concluded that itcould not fully service the needs of the Company. In resigning, KPMGadvised the Company that due to the existence of the internalinvestigation, it is possible that additional information could arise thatmight materially impact the fairness or reliability of the financialstatements of the Company. Based upon inquiries made of KPMG in connectionwith the internal investigation, KPMG stated to the Company that it was notin possession of any such information at this time. The report of KPMG onthe Company’s financial statements as of June 24, 2004 and for the periodfrom inception, April 13, 2004 to June 24, 2004 did not contain an adverseopinion or a disclaimer of opinion and was not qualified or modified as touncertainty, audit scope or accounting principles. In connection with thataudit, and in the subsequent interim period, there were no disagreementsbetween KPMG and the Company on any matter of accounting principles orpractice, financial statement disclosure or auditing scope or procedure orany other reportable events requiring disclosure in accordance with Item304 of Regulation S-K. The Company highly values the work of KPMG as itsauditor and appreciates the valuable assistance they provided during theCompany’s initial public offering and thereafter.
The Company provided KPMG with a copy of the foregoing disclosures andrequested in writing that KPMG furnish the Company with a letter addressedto the Securities and Exchange Commission stating whether it agrees withsuch disclosures. Upon receipt of the letter from KPMG, the Company willfile such letter as an exhibit to its current report on Form 8-K.
On January 7, 2005, the Audit Committee approved the engagement of BDO asthe Company’s independent auditors. The Company had retained BDO asindependent accountants for the acquisition of its subsidiary, GasSolutions II Ltd. However, the Company, or anyone acting on its behalf,has not consulted with BDO with respect to either (1) the application ofaccounting principles to a specified transaction, either completed orproposed; or the type of audit opinion that might be rendered on theCompany’s financial statements, or (2) any matter that was the subject of adisagreement. The engagement of BDO is subject to BDO’s completion of itsdiligence and the conclusion of the Audit Committee’s investigation of theallegations. The Company looks forward to a long and productiverelationship with BDO.
About Prospect Energy Corporation
Prospect Energy Corporation is a financial services company that lends toand invests in energy-related businesses and assets. Prospect Energy’sinvestment objective is to generate both current income and long-termcapital appreciation through debt and equity investments.
This press release contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995. Forward-lookingstatements involve risks and uncertainties, including, but not limited to,statements as to our future operating results; our business prospects andthe prospects of our portfolio companies; the impact of investments that weexpect to make; the dependence of our future success on the general economyand its impact on the industries in which we invest; the ability of ourportfolio companies to achieve their objectives; our expected financingsand investments; the adequacy of our cash resources and working capital;and the timing of cash flows, if any, from the operations of our portfoliocompanies.
We may use words such as “anticipates,” “believes,” “expects,” “intends”,”will”, “should,” “may” and similar expressions to identify forward-lookingstatements. Such statements are based on currently available operating,financial and competitive information and are subject to various risks anduncertainties that could cause actual results to differ materially from ourhistorical experience and our present expectations. Undue reliance shouldnot be placed on such forward-looking statements as such statements speakonly as of the date on which they are made. We do not undertake to updateour forward-looking statements unless required by law.
Contact:Please send investment proposals to:Prospect Energy CorporationJohn Barryjbarry@prospectstreet.com212-448-0702Grier Eliasekgrier@prospectstreet.com212-448-0702