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September 13, 2013

Shareholder lambasts Liquid Gold CEO

Sometimes, buy-and-hold strategies can burn an investor. And after years of poor performance, Mark Goldstein, CEO of Scott's Liquid Gold, has rubbed the company's largest shareholder the wrong way.

Timothy Stabosz, with 6.5% ownership, is the largest outside shareholder of Scott's Liquid Gold, Inc. Today, in a Schedule 13D Amendment filing with the SEC, Stabosz lays out the case how, under the current CEO's 20+ year tenure, sales of the company's signature household product line have been thoroughly decimated, peaking at $22.5 million in 1992, and dwindling to $4.9 million in 2012...a staggering 78% decline. (Adjusted for inflation, as measured by the CPI, the decline is a devastating 87%.) Stabosz further accuses a "do-nothing board" of "looking the other way," and allowing the CEO to "cannibalize" the company, for the sake of his (approx.) $400,000 annual pay package, and his spouse's "nepotistic employment arrangement."

Stabosz ruefully observed, "The board has countenanced the virtual destruction of a once great brand, hiding behind the 'business judgement rule,' and facilitating the maintenance of Mr. Goldstein's outrageous 22 year record of wanton value destruction, incompetence, nepotism, cronyism, self-dealing, and self-entrenchment. It is time for this effrontery to STOP. The company has lost money for 10 consecutive years, and 14 out of the last 15, under Mr. Goldstein, but the board continues to, inexplicably, stand behind the SLGD family scion. The purpose of a board is not to indulge a CEO, merely as an ongoing 'family tradition,'" Stabosz pointed out. "Goldstein has been thoroughly discredited as a manager...and yet this board continues to support him, and pay him an exorbitant sum, for the privilege of 'fleecing' SLGD's outside shareholder base. Where is the board's self-respect?"

Stabosz also singled out long-time director Gerald C. "Bud" Laber for criticism, noting how, as the longest serving nominally independent director (Laber joined the board in 2004), Laber still owns NO common stock outright. Stabosz, furthermore, accused Laber of being a "professional enabler" of Goldstein.

Stabosz explained, "Sitting on a total of 5 corporate boards as he does, is Bud Laber's 'head-in-sand' attitude, one wonders, the result of him spreading himself too thin, or is it that this classic 'Mr. Nice Guy', like the CEO himself, is simply incapable of confronting reality, facing facts, and making tough decisions? The net result is the same: more pain, and more suffering, for SLGD shareholders. What I have noticed about Mr. Laber is that robust notions of fiduciary duty take a disheartening back seat to his overweening preference for maintaining loyalties to individual people. That is why, tragically, he has catered to the CEO's wishes, and shielded the CEO from the stark truth of his epic managerial failures. In this way, Laber has deserted the outside shareholder base...and the rightful, true, and noble concept of fiduciary duty. Specifically, Goldstein's seeming 'birthright' to continue to run SLGD, into perpetuity, has always been a 'given' with Mr. Laber. No other considerations seem to have seriously entered his mind, in 9 desultory years on the SLGD board,'" Stabosz opined.

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