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As We Bid Mr. Bench a Fond Farewell, Let's Take Stock
Wednesday, April 21 2004 @ 12:20 PM EDT

Now that Robert Bench has announced his retirement in six months, it's a good time to review our history together. First, all the SEC filings for Mr. Bench from 2001 to the present, followed by a look back on some controversial topics where Mr. Bench played a role, insiders trades, stock plans, and missing risk factors, and then a list of all the teleconferences where he spoke. You will notice we have a new audio transcripts page, where all the audio transcripts of teleconferences and interviews are now permanently available, linked to on the left as Transcripts. Court transcripts are elsewhere, in the Legal Docs page.

First, the stock history for Mr. Bench:

15-Dec-03
7,000 ... transaction Code G... Price $0 ... 214,043 left after transaction.

9-Oct-03
6,800 sold at $16.60 . . . value= $112,880.00
214,243 shares still owned after transaction.
1. This sale was effected pursuant to a Rule 10b5-1 sales plan adopted by the reporting person.

11-Aug-03
7,000 sold at $10.90 . . . value= $76,300.00
221,043 shares still owned after transaction.
1. This sale was effected pursuant to a Rule 10b5-1 sales plan adopted by the reporting person.

9-Jul-03
3,700 sold at $11.10 . . . value=$41,070.00
300 sold at $11.12 . . . value= $3,336.00
550 sold at $11.05 . . . value=$6,077.50
2,450 sold at $10.91 . . .value= $26,729.50
228,043 shares still owned after transaction.
This sale was effected pursuant to a Rule 10b5-1 sales plan adopted by the reporting person.

9-Jun-03
1,900 sold at $9.3 . . . value=$17,670.00
400 sold at $9.2 . . . value=$3,680.00
500 sold at $9.201 . . .value= $4,600.50
200 sold at $9.19 . . . value=$1,838.00
4,000 sold at $9.16 . . . value=$36,640.00
235,043 shares still owned after transaction.
This sale was effected pursuant to a Rule 10b5-1 sales plan adopted by the reporting person.

9-May-03
5,000 . . . $0.000 . . . $0.00
Shares gifted in accordance with Insider's 10b5-1 trading plan filed with the Issuer. 240,860 shares owned after transaction.

9-Apr-03
4,100 sold at $2.9 . . .value= $11,890.00
241,094 shares owned after transaction.

28-Mar-03
100,000 acquired, nonqualified stock option, $2.07. . . $0.000 . . . $0.00
100,000 beneficially owned following the transaction

12-Mar-03
7,000 sold at $3.06 . . . value=$21,420.00
245,194 owned after transaction.

When I searched from 2001 to 2004, I found no filings other than the above for Robert K. Bench. This indicates to me that he didn't sell any stock in this company, despite being with the company for three years now, until March 10 of 2003, filed on the 12th. It was on March 6 SCO filed its lawsuit against IBM.

You may remember SCO's press release about its executive officers selling stock:

The SCO Group, Inc. (Nasdaq: SCOX) encourages its directors and executive officers to sell the stock held by them through plans designed to qualify for the protections provided by Rule 10b5-1 under the Securities Exchange Act of 1934.

The 10b5-1 plans provide for future sales of stock, at predetermined times and in amounts and under conditions specified in the plans, without subsequent instructions from the participants. These plans have been adopted by the following individuals: Robert Bench, CFO; Jeff Hunsaker, Sr. VP Marketing; Reg Broughton, Sr. VP International Sales; and Michael Olson, VP Finance/Controller. These plans have been implemented primarily for the purpose of providing liquidity to the participants to meet sizable personal tax liabilities resulting from the vesting of restricted stock awards.

During the three months ended July 31, 2003, individuals selling under approved 10b5-1 plans sold 88,000 shares of the Company's common stock. Two other executive officers sold 29,616 shares during the same three-month period in Company approved open trading windows. For the upcoming three-month period to end on October 31, 2003, the above-referenced executive officers may sell up to 141,000 shares of the Company's common stock under current 10b5-1 plans if the conditions of the various plans are met. No other directors or executive officers have implemented a 10b5-1 trading plan to sell shares of the Company's stock during the next three months.

Our directors and executive officers beneficially hold approximately 6,005,000 shares and options to acquire an additional 2,016,000 shares.

Likely you recall the Bloomberg News story, in which Darl McBride said that SCO's CFO, Robert Bench, submitted a sales plan in January "months before legal action was contemplated":
Chief Financial Officer Robert Bench began the selling by SCO insiders, four days after SCO filed the suit against IBM. Bench is selling to help pay a $150,000 tax bill, McBride said. Under the Sarbanes-Oxley law, companies are no longer able to loan executives money to pay taxes or other expenses.

Bench submitted a sale plan in January, months before any legal action against IBM was contemplated, McBride said. His agreement called for the sales to begin on March 8. He planned to sell 5,000 shares a month for the next 12 months, according to the plan.

I believe the above trades indicate he was able to meet that tax bill with some to spare. Now, I'm no stock expert, but as for SCO not "contemplating" any legal action in January, here are some news stories that I believe indicate that they were at least contemplating legal action by January:

Mr. Bench himself responded to questions about insider trading in an interview with Computer Business Review in August of 2003:

SCO's chief financial officer, Robert Bench, said that most of the shares had been sold under an SEC plan designed to prevent insider trading by ensuring that a specified number of shares are sold on pre-determined dates, regardless of whether or not the price is positive or negative.

Bench said that all SCO executives had taken substantial cuts in salary over the last year and had been awarded restricted stock to ensure that their earnings reflected the performance of the company and the success enjoyed by shareholders.

"These plans have been implemented primarily for the purpose of providing liquidity to the participants to meet sizable personal tax liabilities resulting from the vesting of restricted stock awards," said the company in a statement, referring to the 10b5-1 plans adopted by Bench, as well as VP of worldwide marketing Jeff Hunsaker, VP of finance Michael Olson and VP of international sales Reginald Charles Broughton.

"It certainly couldn't be considered unloading stock," said Bench, who pointed out that these executives have sold a small proportion of the more than eight million shares held by SCO directors and executives. "It's a very small portion of the holding SCO executives are holding, and for the most part it's taking care of liabilities that they have to pay."

And finally, as the sun sets over the Bench horizon, and we bid him a fond farewell, we remember his part in the teleconferences, February 2003 and May and August and October and November and December and the Q4 2003 earnings conference they forbad the world to transcribe under penalty of copyright infringement and March 2004.

Is the CFO responsible for missing risk factors in SEC filings? And for corrections and changes?

Mr. Bench is retiring at the ripe old age of 54, according to this Proxy Statement from February:

Robert K. Bench has served as the Company's Chief Financial Officer and Principal Financial and Accounting Officer since November 2000. From April 2000 to November 2002, Mr. Bench served as Vice President and director of Envirofoam Technologies, Inc., and from April 1999 to April 2000, was Vice President and Chief Financial Officer for WebMiles.com. From April 1996 to April 1999, he was Vice President, Chief Financial Officer and a director for Sento Corporation and from April 1991 through April 1996, he was Chief Financial Officer for CerProbe Corporation. Mr. Bench worked for KPMG Peat Marwick from 1973 to 1977. Mr. Bench holds a B.S. degree in Accounting from Utah State University.


  


As We Bid Mr. Bench a Fond Farewell, Let's Take Stock | 79 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here, Please
Authored by: PJ on Wednesday, April 21 2004 @ 12:57 PM EDT
Please put any corrections in this thread, so I can find them easily and quickly

correct any mistakes. Thanks.

[ Reply to This | # ]

As We Bid Mr. Bench a Fond Farewell, Let's Take Stock
Authored by: fcw on Wednesday, April 21 2004 @ 12:58 PM EDT
Interesting press release found on Yahoo!

[ Reply to This | # ]

New MS documents found?
Authored by: Anonymous on Wednesday, April 21 2004 @ 01:40 PM EDT

I am not sure if it has been posted before, but it seems important enough to
perhaps repost it again.
Titled'Microsoft connection is revealed at last'
http://www.orangecrate.com/article.php?sid=686

[ Reply to This | # ]

SCO stock todays's lowest (so far) is $6.44
Authored by: Anonymous on Wednesday, April 21 2004 @ 01:53 PM EDT
And it is rhw lowest in last six months

[ Reply to This | # ]

OT Baystar
Authored by: Anonymous on Wednesday, April 21 2004 @ 01:58 PM EDT
I was hoping that by now, we would have more information on WHY Baystar wants
out and WHAT EXACTLY Sco did wrong!

Are we likely to hear anything soon?

Paul, UK.

[ Reply to This | # ]

That Explains It
Authored by: Anonymous on Wednesday, April 21 2004 @ 02:08 PM EDT
The August 2002 Linux Journal article quotes McBride:

"I just wanted to know what real, tangible intellectual property value the
company held."

If you believe IP is real and tangible, you'll believe anything. And the rest,
as they say, is history.

He may find Negative Goodwill and Penal Property (jailtime) is rather more
tangible.

[ Reply to This | # ]

OT: M$ says SCO is not the endgame
Authored by: Anonymous on Wednesday, April 21 2004 @ 02:31 PM EDT

Slightly worrying little piece of FUD from the Linux Developer Expo in London. Apparently an M$ "person" has stated at the conference that "SCO is not the endgame and that it's likely more cases will follow". Is it just bravado or are there more legal chains about to be "yanked" (I'm a brit so 'scuse me, pun intended :o)

Full article here

Make of it what you will.

CPW

[ Reply to This | # ]

Are unreported transactions allowed?
Authored by: darkonc on Wednesday, April 21 2004 @ 02:31 PM EDT
If not, then there are some discrepamcies im his reporting.

The following table has 4 columns:
The first is the reported holding
The secomd is the size of the sale (-acquisition) or the date if a reported holding
The third is my calculated result
The fourth is the difference on a reported holding date

NOTE: this completely ignores the 100000 share acquisition on Mar 24

report  sale    calc    diff
245194  Mar 03  245194
        4100   
241094
241094  Mar 03  241094
        -5000   246094
240860  9-May          
5234
        1900    244194
        400     243794
        500     243294
      
 200     243094
        4000    239094
235043  9-Jun           4051
        3700
   235394
        300     235094
        550     234544
        2450   
232094
228043  9-Jul           4051
        7000    225094
221043  11-Aug       
  4051
        6800    218294
214243  9-Oct           4051
        7000   
211294
214043  15-Dec  211294 -2749
or is he simply as incapable of dealing with numbers as their lawyers are of dealing with facts and law?

---
Powerful, committed communication. Touching the jewel within each person and bringing it to life..

[ Reply to This | # ]

Famous Last Words....
Authored by: MikeA on Wednesday, April 21 2004 @ 03:00 PM EDT
....SuSE isn't concerned. "SCO is a trusted UnitedLinux partner," spokesman Joe Eckert said. "We have faith in what they're doing."

...right up there with "the automobile is only a fad."

As quoted on CNET January 14, 2003:"Our Unix IP is a significant asset. And for several months, we have been holding internal discussions, exploring a wide range of possible strategies concerning this asset," the company said in a statement Monday. SCO hasn't decided how exactly to collect more Unix revenue, the company added. (Emphasis mine)

Hmmmm....not like its a smoking gun or anything, but sure sounds like they might have considered legal action against people 'several months' before any stock sales were planned. Does anyone know if IBM issued a subpoena for documents related to discussions w/ Boies?

---
Change is merely the opportunity for improvement.

[ Reply to This | # ]

Follow the Money!
Authored by: lightsail on Wednesday, April 21 2004 @ 03:55 PM EDT
Early 2003: 245,000 shares @ .70 = $171,00.00

Total Cash out 2003 & 2004 = $360,00.00

Current Shares 214,000 @ $5.00 =$ 1,070,000.00

TSG's Legal Value Added Strategy added $190,000.00 in cash value ( more than 2X
early 2003 value) and currently over one million in rapidly declining stock
value.

This is just one executive's account. This strategy have certainly put millions
into insiders pockets.

Can we determine how much Canopy gained by this strategy?

Can we track more insider dollars to see the big picture?

Perhaps that would pique interest with the SEC?



[ Reply to This | # ]

Is this because of the BayStar deal
Authored by: Anonymous on Wednesday, April 21 2004 @ 04:06 PM EDT
Is Bench retiring a response to the BayStar deal? Was he some how responsible
for BayStar pulling out?

[ Reply to This | # ]

Not totally evil this time.
Authored by: arch_dude on Wednesday, April 21 2004 @ 04:24 PM EDT
Yes, SCOG upper management remains ethically challenged and morally retarded.
Yes, I would get great personal satisfaction if each of them had to declare
personal bankruptcy and go to jail.

However, a pre-planned sale of stock associated with a pre-ordained vesting
schedule is a basically prudent and sound thing to do, regardless of what you
think will happen to the stock. Many of my friends got very badly burned during
the bubble because they did not do this.

Here's what happens: Stock is issued to you at a low price. When it vests, you
must declare the difference between the low price and the market price as
income, and you must pay taxes on that income. This is true even if you do not
sell the stock at that time, and it remains true even if the stock price drops
and is much lower when you actually sell it. Basically the same thing happens
when you excersize (non-ISOP) options. Therefore, the prudent and fiscally
conservative thing to do is to sell enough shares to cover the taxes as soon as
the shares are vested. But corporate officers cannot do this unless they have a
pre-planned sell.

I have one friend who lost his house in a deal like this. Basically, the dot.com
gave him options. The options vested at the peak of the bubble, and he purchased
the shares for a fantastic paper profit. Not understanding the rules, and
believeing that the stock would go higher, he kept the shares and rode them into
the ground, believing the bust was temporary. Never saw a cent, but still had
the tax liability from the "profit."

[ Reply to This | # ]

Date of plan setup
Authored by: widowmak3r69 on Wednesday, April 21 2004 @ 04:37 PM EDT
Am I wrong on this? Would someone corect me if I don't have this right. Didn't
SCO give IBM almost all the 100 days(or whatever the # was I forget) to remedy
the 'contractual problem' as dictated by their contract? Wouldn't that push
their intentions back well before Mr Bench created and filed his plan? They're
quoting March all over for filing the suit, and they say that Bench filed the
plan in January. But there was maybe 60 days between Bench's filing and the
lawsuit filing. I thought SCO jumped the gun early and only gave them like 90 of
the 100 days(could be wrong they may have given all of it) but even by the most
liberal numbers, that would preceed Bench's filing date of the plan by at least
a month.

Can anyone else corroborate this for me?

This would mean that the Plan was created AFTER SCO began down their path of
extortion, not before, as Darl is misleading us to believe.

It was a formal service of papers to IBM if I recall, which means they would
have already had lawyers involved going over all the aspects. They knew from the
start that IBM wouldn't just lie down and accept what SCO was shoveling at them
which means they would have known this suit was on the horizon.

Suddenly, a month after the notification, SCO releases a plan that allows their
board members to dump stock like Niagara Falls. And they're doing this full well
knowing it's going to go to trial and what it's potential effect on stock price
is going to be when the financial world sees they're suing for $1 billion.

I disbelieve your claim of innocence Darl. You're manipulation of stock for you
and your board member's benefit is becoming more and more apparent. With the SEC
investigating for fraud, Baystar grasping at minor contractual straws to get
their $ back, and the 'coincidence' of stock deals that make your board
boatloads of money, the only good thing I see about an investment in SCO would
be a short position.

Too bad this isn't in Arizona. I'd love to see Darl in Sherrif Arpaio's pink
underwear, green baloney prisons.
http://www.pww.org/article/articleview/4786/1/202/

[ Reply to This | # ]

AMT
Authored by: RedBarchetta on Wednesday, April 21 2004 @ 04:53 PM EDT
Regarding SCO's press release about the pre-planned stock sale(s) by their executives, I wouldn't doubt the part about selling portions of shares to meet tax burdens. The IRS has this wonderful thing called the Alternative Minimum Tax, or AMT.

Apparently this wonderful tax has been causing problems for taxpayers in terms of sudden, costly tax bills, and, if I'm not mistaken, those who own options in corporations can be hit particularly hard (any tax accountants out there?). I can see this being a problem for some of the SCO executives.

Aside from that, I believe they are illegally profiting regardless of their tax burden.

Here are some more links on AMT:

Smartmoney.com: The Alternative Minimum Tax

The Brookings Institution: Key Points on the AMT

U SA Today: AMT is Nipping At Middle-Class Heels

[ Reply to This | # ]

OT: Fallacious Arguments from SCO ?
Authored by: Anonymous on Wednesday, April 21 2004 @ 05:45 PM EDT
Here is a wiki list of fallacious arguments which can sometimes seem persuasive even though they are not supported by sound reasoning.

Exercise for the reader. How many of these fallacies has SCO applied in its press releases, court filings and public statements?

They seem to get a lot of mileage out of ArgumentByGibberish, but they also use a lot of AdHominem attacks, AvoidingTheQuestion, CorrelationImpliesCaus ation, and various others...

In fact I bet you could find examples of nearly all of these in SCO's public utterings!

SCO speaks with forked tongue. (My own SweepingGeneralization) .

[ Reply to This | # ]

Analyst Melanie Hollands uses the T-word
Authored by: jayfar on Wednesday, April 21 2004 @ 08:31 PM EDT
As in "Toast." See Key factors driving movement of SCO Group stock, Part 2 at IT Manager's Journal. "Over the last few months, however, it has become increasingly clear that these guys are toast."

All in all she gives the clearest explanation I've read yet of scox's stock price behaviour, including hindsight examples of other stocks (such as a last gasp bounce in Enron's price just before the roof caved in).

[ Reply to This | # ]

As We Bid Mr. Bench a Fond Farewell, Let's Take Stock
Authored by: bobh on Wednesday, April 21 2004 @ 10:22 PM EDT
I see that one Michael Olson, VP Finance/Controller, is listed among those who filed a 10b5 plan.

Is this fellow still around? More to the point, how come he was not named CFO when Bench, umm, retired? The guy in this slot is usually the one being groomed by the CFO to be his replacement.

That they went outside for this tells me one of two things. Either the Bertster was rammed down their throats by one or more major investors, who want to have "their guy" on the inside watching things, or the SCO board went out to acquire an expertise they don't have inside.

In the case of CFO's, a common expertise to seek outside (because normally you would never hire a guy who has been through this) is bankruptcy experience. Bankruptcy is a complex procedure and there are a lot of mistakes you can make. The wiser boards of directors will go outside and get one of these guys if they see bankruptcy on the horizon.

Does Bert Young fit that model? Sure does. Mr. Young was CFO of Marchfirst when it crashed and burned 3 years ago. He got himself sued and everything.

"Consulting CFO's" who come in to handle a bankruptcy charge premium prices, and always in cash. These are not career opportunities; these are 1- or 2-year stints that end with the company ceasing to exist.

They didn't find Mr. Young and negotiate a deal with him in the period between the shareholder's meeting and this morning. They have been thinking about this change for a while.

I believe that Captain Yarrow has activated the Self-Destruct Sequence. Do not cheer when Darl McBride is suddenly replaced. It means they have extracted him to keep him safe. He will leave with a golden parachute, and some board member will step in as "acting CEO." At that point, the bankruptcy filing is days away. By then Canopy will have extracted anyone they intend to keep. The acting CEO and the hired-gun CFO will then crash the thing and deal with the fires afterwards.

[ Reply to This | # ]

There's a small basic mistake in your analysis
Authored by: crs17 on Wednesday, April 21 2004 @ 11:05 PM EDT
I've looked at the insider trading, but never published it here. I have the
same list of trades that you have but you assume that the sale price is all
profit to Mr. Bench. As far as I can tell, Mr. Bench's options were all priced
at $1.12. That means he had to buy each share at $1.12 before he could sell it
at the prices shown. So his profit on each share is reduced by $1.12. So, by
my totals, he netted $381,131.50 (which totals your figures) over that period
but his profit was "only" $331.963.50.

This necessity to first buy the stock at $1.12 also explains why you couldn't
find any transactions before March 10, 2004. Before that time, SCOX stock was
generally below $1.12, so the options were worthless at that time. Why buy at
$1.12 when you'd lose money if you sold it at $0.87 or whatever the price was.

As to stock manipulation, Bench wasn't the worst. As another poster has stated,
he was basically selling on a schedule (once a month) as soon as his options
became worth anything. It's not clear why the number of shares changes slightly
from month to month, but the repetitiveness is stronger than the variability.

[ Reply to This | # ]

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