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Leaf Group investors allege CEO conflicts tainted strategic review

Six major investors in Leaf Group, pushing for the ouster of the content company's chief, said on Monday his strong ties with a board member compromised a recent strategic review of the operator of online brands.

By Svea Herbst-Bayliss

BOSTON, July 13 (Reuters) - Six major investors in Leaf Group LEAF.N, pushing for the ouster of the content company's chief, said on Monday his strong ties with a board member compromised a recent strategic review of the operator of online brands.

"The so-called independent review of strategic alternatives at Leaf Group was ... tainted before it ever began in earnest," the group wrote to Leaf's board.

The group, which owns over 40% of Leaf's stock, said Chief Executive Sean Moriarty "had undue influence over the strategic process," and that the board "apparently concealed the conflict of interest from shareholders."

The group, which started its push to replace Moriarty in late June, includes Osmium Partners, PEAK6 Investments, Boyle Capital Opportunity Fund, Oak Management Corp, Generation Partners II LLC and Spectrum Equity Investors.

Leaf did not immediately respond to a request for comment.

This is the investors' second letter to Leaf's board within four days. They are also demanding a new slate of directors, annual board elections, and the sale of Leaf's media and marketplace assets.

Last year Osmium pushed for Leaf, which operates online brands including LIVESTRONG.COM, to consider an immediate sale of the company.

Monday's letter said Leaf last year appointed Charles Baker to the board and tapped him to oversee a strategic review committee. Later in 2019, Baker was named chief financial officer at Eventbrite EB.N where Moriarty serves on the board and oversees the compensation committee.

"It is simply impossible for shareholders to believe Mr. Baker would not heavily weigh the skewed input of Mr. Moriarty, an executive with a desire to continue earning millions every year from his CEO role at a stand-alone Leaf Group," Monday's letter said.

(Reporting by Svea Herbst-Bayliss; Editing by Richard Chang)

((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters Messaging: svea.herbst.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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