Skip to main content
No. of Recommendations: 25
I think it’s important to understand Brad Jacobs and his history.

I would never invest in any company with Bradley Jacobs at the helm because of his past incompetent unscrupulous management track record from 1997 to 2003 while Chairman and CEO at then small cap United Rentals (URI).

• At the beginning of United Rentals in 1997, co-founder Bradley Jacobs served as Chairman and CEO, co-founder John Milne as Vice Chairman and Chief Acquisition Officer, and Michael Nolan as CFO.

• In 2001, Milne became President and concurrently CFO in 2002.

• In October 2003, Jacobs stepped down as CEO, turning over this position to Waylan Hicks. Milne remained as CFO.

• In August 2004, the U.S. Securities and Exchange Commission (SEC) announced that it was investigating URI and had subpoenaed accounting records.

• In August 2005, United Rentals terminated its president and CFO, John Milne, for refusing to respond to questions from a special committee of URI board of directors that was reviewing the SEC inquiry.

• In August 2007, Bradley Jacobs gave up his URI chairmanship and director position.

• On September 8, 2008, The Securities and Exchange Commission announced that it filed charges against United Rentals, Inc. (URI) alleging that URI engaged in financial fraud and in a broad range of other improper accounting practices.

The Securities and Exchange Commission charged United Rentals with engaging in fraudulent transactions to meet company earnings forecasts and analyst expectations. The SEC also charged the company with a broad range of other improper accounting practices.
Without admitting or denying the charges, the new management team at URI agreed to settle the SEC's enforcement action and pay a $14 million penalty, which the Commission intended to place in a Fair Fund for distribution to affected investors.

• On March 11, 2010, former URI President and CFO Milne, who pleaded guilty to one count of conspiracy to falsify the books and records, was sentenced to 27 months of imprisonment, followed by three years of supervised release. Also, in order to resolve a separate civil action brought by the Securities and Exchange Commission, Milne agreed to disgorge $6.25 million.

• In a FBI news release on November 2, 2010, the U.S. Attorney, District of Connecticut announced former URI CFO Nolan was sentenced to three years of probation for making false filings and ordered to pay restitution of more than $1 million.

Interestingly and factually, only after ridding itself of these corporate governance scoundrels (Jacobs, Milne and Nolan) did URI realize its most explosive rise in stock prices from 2009 to 2014.

What disturbs and bothers me most is where was Bradley Jacobs while fraud and accounting violations were occurring on his watch as URI Chairman and CEO from 1997 to 2003. The SEC lawsuit stated:

From 1997 to 2000, during a period of enormous growth through acquisitions, URI engaged in improper accounting practices involving its valuation of acquired assets, use of acquisition reserves, and accounting for customer relationships. In addition, the Company improperly accounted for other items that overstated net income, including the estimation and recording of self-insurance reserves, its recognition of equipment rental revenues, and its income tax accounting. As a result, URI violated the reporting, record-keeping and internal control provisions of the federal securities laws.
From 2000 through 2002, URI engaged in six fraudulent sale-leaseback transactions designed both to allow URI to recognize revenue prematurely and to inflate the profit generated from the sales. URI knew, or was reckless in not knowing, that its accounting for the transactions was not in accordance with generally accepted accounting principles and, as a result, that the profits URI recognized materially overstated its financial results.

As the CEO and largest non-institutional stockholder at URI, Bradley Jacobs surely should have known what the hell was going on. Perhaps, Jacobs seriously got worried about the fraudulent transactions and improper accounting, stepped down as CEO in 2003, and ducked in the weeds, musing scape-goat candidates. The big question is how did Chairman/CEO Jacobs get off the hook while fraud and improper accounting occurred on his watch? Perhaps, he struck a confidential deal with the SEC and FBI to rat on co-founder John Milne and Michael Nolan.

After leaving URI for good in August 2007, Jacobs was at it again five years later, quickly growing a very young company XPO via a very aggressive acquisition binge and tantalizing investors with large revenue gains. However, today there are significant financial shortcomings in this company’s income statement , balance sheet and cash flow statement as pointed out in putnid’s post on 4/28/2015.
putnid warned:
Jim Chanos, a celebrated short-seller (whom I respect) often warns of "serial acquirers." I suggest that XPO's financials illustrate how one might make a company seem financially long as one ignores the ever increasing goodwill, long-term debt and share dilution.
I'm a conservative investor. I'm gonna pass on XPO.
I suggest folks read the Annual Report(s) carefully before they decide for themselves.

Also, back in February 2015, ptheland posted these wise words that are included Saul’s “Our New Improved Knowledgebase, edition 2, July 2015”:
So I'd say the first step in evaluating a business is not to look at their finances, but to look at their management. Honest management will give honest financial statements. Dishonest management will give investors dishonest financial statements - even if those statements follow GAAP. When you find dishonest management, move along. You will never be able to fully trust information coming from that company.

Bottom-line: Bradley Jacobs had a dishonest terrible management track record as CEO at URI. I reject that unscrupulous Chairpersons, CEOs and CFOs can be “born again.,” Frankly, I do not trust and have zero confidence in Bradley Jacobs serving in any corporate governance role.

As always, conduct your own due diligence.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.