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July 31, 2015

Caldwell Partners triumphs over DHR International

Update July 31, 2015: Adds David Hoffmann's comments to Caldwell's win

A release to the market on July 30, 2015 showed that DHR realized that they will not be able to disrupt Caldwell Partners:
"Caldwell Partners … today announced that its Chairman, G. Edmund King, and the Chairman of DHR International (“DHR”), David Hoffmann, had concluded, on an amicable conference call, that Caldwell Partners and DHR would cease further communications regarding an acquisition transaction by DHR for Caldwell Partners at the present time.  As part of the conversation, Mr. Hoffmann and Mr. King agreed that DHR would dispose of its approximately 5.6% of the shares of Caldwell Partners and, in order to avoid any overhang of these shares in the market, Caldwell Partners agreed to purchase such shares at a price of C$1.40 per share. Messrs. King and Hoffmann also agreed to a two-year mutual non-solicitation understanding, pursuant to which neither would solicit partners or search consultants of the other, but may hire partners and search consultants who leave employment or who initiate discussions with the other party (with prior discussions being grandfathered), and a two-year standstill pursuant to which DHR and its affiliates would not acquire shares of Caldwell Partners. The agreements are subject to the negotiation and execution of mutually acceptable definitive documentation."
Laughably, David Hoffmann was then quoted by his PR aparchicks, Hunt Scanlon as saying:
"DHR does not want to be, nor ever wanted to be, involved in a hostile takeover. We want to wear a white hat, as we always have."
Not sure those at CTPartners would believe this. And of course, Hunt Scanlon have the inside word from DHR:
"David Hoffmann has not backed off his belief that these two search firms should join forces to maximize their potential as a combined force in the recruiting industry. I would not be at all surprised to see another combination attempt in two years time."
This all followed the Chairman of Caldwell Partners writing a further letter to DHR International on July 28, 2015:
"In your letter, you make several accusations regarding the Board's fiduciary duties and enumerate a number of requests regarding the Board's review process.  Rest assured that the Caldwell Partners Board is well aware of its fiduciary duties and is confident that it is fully compliant.  Accordingly, the Board does not intend to respond to you on any of these matters." 
"DHR's interest in Caldwell Partners – both as a destabilizer and as a potential acquirer – is at odds with the interest of our corporation and its various constituencies, including our shareholders.  Indeed it is difficult, if not impossible, to treat your recent subversive recruiting activities as anything but disruptive attempts that could adversely affect shareholder value." 
"What is further frustrating is that you are ignoring the impact that your continued advances could cause on the business you wish to acquire.  Our Board was copied on a letter sent directly to you on July 16, 2015, from and signed by each and every one of our 37 partners.  The letter states unequivocally that none of the 37 partners wish to work for an entity controlled by DHR, and that any transaction that accomplishes this would be "an empty one void of significant producers and shareholder value will be destroyed". It is my understanding that the letter was written, and consensus on it obtained, exclusively from the partners themselves. I am attaching it again for your reference." 
"It is the job of our Board of Directors to do what is in the best interest of the corporation and to protect and enhance the investment of all our shareholders.  As such, it is incumbent upon us to decline any further invitation to meet with you regarding an acquisition of Caldwell Partners by DHR."
Caldwell Partners continues to be in play, with around 300,000 shares trading on July 22 and 23. Speculation is that this is DHR building its stake, with a greater volume to that acquired by DHR on July 13. We posted on July 23 that we expected Hunt Scanlon's lead story (paid advertisement?) in its 'Daily Newswire' to once again focus on this story and of course it did.

On July 24, DHR responded to Caldwell's July 17 letter, but have said nothing new. Perhaps the most interesting part of DHR's latest letter is their tone of indignation that Caldwell are not rolling over.

On July 17, Caldwell Partners issued another letter/press release reiterating they want to have nothing to do with DHR International:
"Our refusal to engage in further discussions with DHR was strongly validated by the events that were occurring prior to my July 14, 2015 letter. While you professed to me on our July 7, 2015 phone call that you would like to avoid a confrontation, we are aware of at least four attempts by DHR partners specifically stating they represented you to contact our partners in order to urge them to "jump ship" and join DHR prior to any transaction. We believe this was a clear attempt to undermine our business and depress our Company's share price."
"Simply put, and as they have expressed to you, our partners are not willing to be part of a firm controlled by DHR.
"Our Board of Directors has the responsibility to protect the investment of all our shareholders. As such, we will vigorously defend any further attempts by DHR to disrupt or undermine our business." 
Caldwell Partners' earlier press release said:
"The Caldwell Partners International Inc ... today announced that its Board of Directors, after consulting with its financial and legal advisors, has unanimously determined that pursuing discussions with DHR International, Inc. at this time is not in the best interest of the firm, its shareholders, partners, employees and clients."
"...our partners have expressed to us their significant concern and have made it clear that they would not be willing to be part of a firm controlled by DHR."
This caused DHR's lawyers have written a heavy-handed letter back to the Chairman of Caldwell accusing the Caldwell Board of not fulfilling their duties as board members. Some would say this is laughable as DHR are hardly a bastion of ethical behaviour but at least DHR are not stupid enough to be publicly traded.
"The Caldwell Board’s determination is unsupported, unacceptable for a publicly traded company and violates the board members’ fiduciary duties to its shareholders."
DHR have been spitting out press releases flagging their interest in Canadian listed Caldwell Partners.
"Global search firm DHR International announced today that it has increased its share holdings in Caldwell Partners International (TSX: CWL) to 1,141,000 common shares, representing approximately 5.36% of the common shares outstanding. DHR believes that it is now the third largest shareholder of Caldwell International. In addition, DHR announced that its Chairman, David Hoffmann, and Edmund King, Caldwell’s Chairman, had spoken recently concerning DHR International’s interest in the company. Mr. King advised Mr. Hoffmann he anticipated Caldwell’s board of directors would be meeting Thursday, July 9 to discuss DHR International’s interest."
Actually, that press release, following one on July 2, suggested that DHR have increased their shares minimally from holding 5% to 5.36% of the outstanding shares. In other words, DHR are churning out press releases with little new information and trying to keep the pressure up. Curiously, the new press release talked about "July 9" as if it were in the future. That date was four days before the release came out.

Although DHR were trying to buy CTPartners Latin America, these offices did not join DHR but joined Caldwell Partnerssee this press release. As pointed out by a reader of our web site, the press release is unusual in that it reveals the commercial terms including a poison pill. If DHR acquire Caldwell in the next two years, then the Latin American partners "have the right to terminate the alliance agreement and will be entitled to a dislocation and rebranding fee of $2.0 million".

This was a brilliant move by both the CTPartners Latin America partners and Caldwell as it effectively adds $2 million to the purchase price of Caldwell and - even if DHR buy Caldwell - they will have to pay this but still won't get the Latin America offices! Caldwell have also put in a similar poison pill provision to other CTPartners' consultants joining the firm. As one reader emailed us, "With no debt, and therefore no back door for DHR, DHR will find it very expensive taking over [Caldwell Partners]".

When did this begin? Shares in Caldwell initially spiked in late June, 2015. See Caldwell's initial press release:
"More than 500,000 shares of the company's common stock traded today, increasing the share price over 40% to $1.84 and spurring the trading halt." 
"Caldwell Partners reports that is has no knowledge of any material change in the affairs of the company which should cause a change in its stock price and it is not aware of either the party or parties acquiring the shares, or the party or parties selling them, and therefore has no information to provide at this time."
It was subsequently confirmed by Scott Scanlon,that DHR International were the acquirers of these shares, Scanlon originally posted the rumor and then confirmed it, as he has a privileged relationship with DHR. His latest post is clearly PR for DHR: as usual, former bankrupt, Scanlon, writes the article, quotes himself as an expert and refers to his ranking table. Do DHR pay for this?
"DHR International has confirmed that it purchased an aggregate of 1,032,00 shares of Canadian rival Caldwell Partners International last week on the open market of the Toronto Stock Exchange. The share purchase represents approximately five percent of Caldwell’s issued and outstanding common shares. DHR said in a call [to Scanlon?] this evening that it believes it is now Caldwell Partners' third largest shareholder." 
"In recent weeks, Chicago-based DHR has been in communication with Caldwell’s management regarding a possible acquisition of the company. DHR said that it expects that any negotiated transaction would be priced at "a premium to the recent market price of Caldwell’s common shares," and that DHR would not require any external financing to complete a full share purchase of the company. To date, no agreement has been reached. According to DHR, it intends to continue exploring its interest in a negotiated transaction with Caldwell and that process is expected to last "at least another couple of weeks" as both companies take time to explore their options."
But the Scanlon story was counter to a Caldwell Partners press release of the same day, where Caldwell said that "on the evening of July 1, 2015 it received a letter from David Hoffmann, Chairman of the Board of DHR International, Inc." and that "This is the first instance of communication from DHR International to the Board of Caldwell Partners, which was not in current discussions with DHR International regarding any proposed transaction." So who is telling the truth as to whether there have been discussions? Remember, DHR claim "in recent weeks, [they have] been in communication with Caldwell’s management regarding a possible acquisition of the company".

DHR's July 13 press release continues with a quote from David Hoffmann.
"David Hoffmann commented … "Caldwell would be a good strategic fit for both firms and we are anxious to continue our discussions…it’s a great firm with great people. The integration of our recent additions of CTPartners’ personnel from around the world has gone smoothly. We feel that a transaction would be beneficial to both Caldwell’s shareholders and its search consultants.""
Why is Hoffmann so anxious? Actually, there is no evidence that the CTPartners "additions" have gone smoothly. It is not even clear how many people have joined. This is a complete lie. In fact, DHR's press release of July 2 claimed DHR had "more than 70 offices" as a result of the CTPartners deal. The press release of July 13 says they only have "more than 60+ offices" (why both "more than" and "+"?). In other words, they picked up fewer offices than they originally claimed.

And is David Hoffmann the Chairman of DHR International or not? Since March, 2015 Stephen Hayes has been listed as the Chairman. It is poor governance to have two people running around claiming to be "Chairman".

Caldwell Partners' employees themselves should be aware of how the CTPartners "acquisition" played out:
  1. DHR made a hostile bid for CTPartners, with tip-offs to Hunt Scanlon Media.
  2. Many CTPartners consultants, not wanting to join DHR, defected.
  3. CTPartners' debt covenants were breached due to the large number of departing consultants.
  4. CTPartners share price crumbled.
  5. DHR reduced their stake.
  6. CTPartners share price crumbled further.
  7. DHR became the only bidder in CTPartners and entered into an exclusive due diligence.
  8. DHR decided not to acquire CTPartners, but did a deal with the lenders to buy certain assets.
  9. CTPartners found they could not continue to trade.
  10. DHR hope to hire (on onerous contracts) CTPartners consultants who have nowhere else to go.
  11. DHR have one less competitor in the market.
Substitute 'Caldwell Partners' for 'CTPartners' and you know how this could play out. This is one of many problems of listed search firms. It is very easy for an unscrupulous competitor like DHR to destroy them. Frankly, this is no win situation for Caldwell Partners. But their response is the right one. Are Heidrick & Struggles or Korn Ferry DHR's next target? DHR love attempting to take over listed firms.

There has been movement from Caldwell to DHR in the past including Sean Scanlon (presumably a relation of Scott Scanlon), Smooch Repovich Reynolds, Jerry McGrath, Carol Hartman, Jessica Henselmann and Elaine Lee. More nervous will be those that have gone from DHR to Caldwell include John Wasley, John Blank and Mark Dillard.


  1. Scott Scanlon has an interesting past. I believe this led to he & Mr Hunt being declared bankrupt.

    Bloomberg, October 3, 2008

    "Whitney Group LLC, a 20-year-old recruiting firm that helped Wall Street banks hire executives, sued its former chief financial officer, claiming his financial ``misappropriations'' caused the company to collapse.

    Ex-Finance Chief Jeffrey Sussman, 51, committed fraud when he advanced ``millions of dollars'' without authorization over four years to Hunt-Scanlon Corp., a company that tracks the executive-search market, according to a complaint filed Sept. 25 in New York State Supreme Court in Manhattan. Whitney also sued Hunt-Scanlon, alleging the Riverside, Connecticut-based company owes it $7 million from the money transfers."

  2. Very interesting.... Chris Hunt the Founder also runs his own recruiting business he quote 'working with many CTPartners employees to find new homes'

    1. Thanks for the tip. What is the name of this business?

    2. I am at a loss for words. That quote signals that DHR and Hunt Scanlon could have easily been working together (DHR would lose a competitor and Hunt Scanlon would gain clients).

  3. This is the scariest paring of 2 highly dishonest companies. DHR are master manipulators and CTP scam artists. Hopefully the markets will know these truths... I hope they spare Caldwell which is a good group.

  4. There is now growing interest from the SEC into a a potential investigation of DHR International, Hunt Scanlon and the writer at the New York Post working to influence and negatively influence CTP share price in order to drive the company either into bankruptcy or submission. Stay tuned..the SEC is one organization you don't want to mess with and DHR will likely be investigated.

  5. I would not be surprised if there was a class action law suit against DHR from CTP shareholders.

  6. The New York Post articles (16 in total – why so many?) are another reason behind the large number of consultant departures from CTPartners in the US. If you do a search for CTPartners on Google, no less than 4 New York Post articles appear on the first page. This had a big impact - not just on the reputation of the firm, but also on the morale of its people.

  7. All you have to do is look at advertisers on Hunt Scanlon. DHR will likely now be pulled but .....

  8. Ok, so the Post.

    The consensus seems to be that Kate Quinn was the source for Kevin Dugan’s early pieces about the harassment complaint that was filed by her workmate at both CTP and DHR, Amy Orlich.

    So there $1million question now is how far were DHR complicit in Quinn contacting her pre-existing contact, Kevin Dugan, and leaking Orlich’s complaint (which Orlich would be unlikely to do herself, you’d think, because it might jeopardize her case with the EEOC). Did she tell them? Did they find out? Did they encourage her to do it to damage a rival? Or was it just a coincidence that became the catalyst for their decision to launch their fake ‘bid’ for CTP and take them down?

    Whatever the truth, it seems that Dugan was taken for a sucker.

    But what does he do come early Feb when DHR makes a hostile bid for CTP and Hoffman starts dissing Brian Sullivan? I mean, isn’t the fact that the allegations were planted by a DHR employee kinda material during the takeover of a public company? And the fact that they were doing real damage to CTP (In the U.S., at least) yet he knew their source was compromised. . . Wouldn’t the reaction to all the Post pieces been somewhat different if everyone knew that the allegations came from someone employed by DHR?

    I mean, seriously, WTF? Doesn’t News International have any disclosure rules about this sort of thing? Did he have information that could materially have affected CTP’s share price – information that he did not disclose?

    I’d love to hear the Post’s editor’s take on this.

    Is this why Dugan eases off the gas after Feb and the later pieces about “beleaguered CTP” only ever refer back to the allegations made BEFORE DHR launched their bid and never mention any new allegations that might have come from Quinn et al, (so keeping him one step away from actually being seen to be interfering in the deal)?

    Whatever, it stinks.

  9. Dugan's article in the NY Post today almost seems to praise DHR as a "would-be rescuer".

  10. There is a download called `Standards of Business Conduct` on the website of the New York Post's parent company.

    It includes a section on "Trust in our business ethics - our commitment to the free market". There is another section entitled Maintaining Credibility where they state "We do not make deliberately false or misleading statements about our businesses, or about other companies."

    Further down they define inside information. "What is inside information? Inside information is material, non-public information. Information is material if it would influence a reasonable person to buy or sell stock."

    I'm no lawyer so I don't exactly know what this means in relation to Kevin's actions.

  11. Also misleading is that most articles I have seen have stated that CTPartners is planning on filing bankruptcy tomorrow. Their press release only stated that they plan to wind down their affairs, and MAY seek bankruptcy protection if necessary. How do so many entities know about the internal affairs and actions of CTPartners?

  12. I really hope there is an SEC investigation so that the truth gets out. CTPartners like many firms had issues but not what was portrayed in the post. If you know Burke he would have never said what the New York Post said he did all quoted from a 'anomoyous ' source! What's really interesting is what was in the New York post as 'quotes' wasn't even in the EOCD compliant. So these lies had to come from the other lady concerned who was a train wreck, a drunk who was dating a married man... She turned up to a pitch once drunk and the client said they never wanted to see her again. She got through 6 EA's while at CTPartners. She then lied and effectively was caught out and given the option to be fired or resign. Facebook friends with Kevin Dugan match made in heaven !

  13. Million $ question is did David H's hedge fund make money on the shorts ...

    1. Probably yes.

      But Osprey Capital, DHR and you know that no regulator is going to investigate. So they'll do it again with Caldwell.

  14. I am at Caldwell and will never ever ever work for the odious DHR.

    What do those at CT Partners suggest I do? It feels like a no win situation: if some of us leave, Caldwell will wither and die. But who wants to be the last person standing in case DHR do succeed in a takeover?

  15. 1. First of all don't go public as an executive search guys are public. go to step 2.
    2. Run, Run, Run from any and all approaches by DHR....including "exploratory" discussions and the is a complete lose-lose...they just want to either take you over or know you out of business.
    3. If they do acquire Caldwell, get the hell out fast

  16. This does not relate to Caldwell, but the company DHR went for before, CTPartners. Can someone explain what actually happened? I do not see any bankruptcy documents online (bankruptcy court documents are public record) and since the June 29 release, no word has come out. I assume CTPartners ceased existence, but can someone confirm?

    1. Nobody knows. They were delisted. The lenders sold the key assets to DHR.

      Yet the website is still up and people still answer the phones in most offices.

    2. We (they) are dead. They terminated almost all of their support staff......keeping as little as possible to finish existing projects. The snake CFO Bill Keneally lined his pockets and a lot of good people are scrambling for jobs. DHR were nothing but predators here, but if I honestly look back........former CEO Brian Sullivan put everyone in the mess with his abhorrent behavior. His spending was reckless, every story about his lewd behavior was probably true, and the spineless "CFO" Keneally was nothing but a yes man.

    3. I still love the final announcement that we CTP wind down operations in a orderly manner. They stiffed all of the clients by shutting down everything and keeping the retainers that were already paid. I'm actually quite sure there are still clients out there that think CTP is still conducting their search because they have not heard otherwise.

    4. No, I think many clients will have head otherwise.

      If the client hasn't paid an invoice or there are still invoices that haven't been sent, then DHR is contacting that client and saying that DHR has acquired the contract. That might make sense when the executing consultant is one of the tiny number that joined DHR, but why would a client pay DHR for an unfinished search?

      This is not good for the executive search industry. DHR are acting like loan sharks.

    5. CTP being delisted officially as of 8/3.

  17. Hoffmann made a public announcement that he wanted the firm and anyone who knows DHR knows that CT Partners consultants would never agree to it and it would be an ugly union. Consultants flee in droves. Stock plummets. Hoffmann acquires the business at a fire sale price because CT Partners has no other options. Now Hoffmann can say he acquired CT Partners and embellish how gigantic DHR is.... and keep on lying through his teeth like he always does. Would love to see a criminal investigation.

  18. Caldwell Partners Board second reps once to David Hoffman's false alligations just hit the wire.

    1. Thanks for the tip off. We couldn't run this web site without the report of readers like you!

  19. Hoffmann lies again when he denies that DHR people have been contacting Caldwell parnters.

  20. Why:

    A. Is DHR always the top story in the Hunt Scanlon newsletter?
    B. Do Hunt Scanlon appear to be the only media outlet with a direct line to DHR?
    C. Have Hunt Scanlon stopped comments on their website?

  21. Dear Mr. King:
    We are in receipt of your letter of July 17, 2015, responding on behalf of the Board of Directors of The Caldwell Partners International, Inc. (“Caldwell Partners”) and its Special Committee (collectively, the “Caldwell Board”) to our letter of July 16, 2015. Before receiving your letter, we were hopeful that the Caldwell Board would give appropriate consideration to the substantial premium that we indicated we would be willing to pay to Caldwell Partners shareholders. Instead, your letter states that the Caldwell Board’s decision not to explore a transaction which would provide that premium is “strongly validated” by selected ordinary course recruitment efforts by DHR, and indicates your belief that as a stand-alone company Caldwell Partners will reach a $100 million in annual revenue. In the face of the facts, and in view of DHR’s public statement of its willingness to pursue a transaction at between C$1.80 and C$2.00 in cash per common share, your response has done nothing to change our prior conclusion that the Caldwell Board’s determination to cut off further discussions is unsupported, unacceptable for a publicly traded company and violates the board members’ fiduciary duties to its shareholders. Your letter refers to four attempts by DHR partners prior to July 14, 2015 to cause your partners to “jump ship” and states they constitute a clear attempt to undermine the business of Caldwell Partners and

  22. Caldwell trading halted again.

  23. Announcement from Caldwell Partners International

  24. Caldwell wins. Eventually, good will always triumph over evil.

  25. It is interesting that DHR didn't put the preset release about the disengagement on there website like all of their other ones. They must not want to broadcast their defeat.

    1. Are you surprised? DHR press releases are only ever filled with bullsh*t anyway. They are the laughing stock of the industry.