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BayStar, Bert Young, and marchFIRST
Monday, April 26 2004 @ 11:44 AM EDT

I told you I doubted that SCO was surprised by the BayStar letter, despite all the articles saying they were, quoting Blake Stowell saying they were stunned and in the dark as to why BayStar had sent them the letter. Now we have confirmation from BayStar:

"Meanwhile, BayStar's spokesperson said the company informed SCO of concerns both verbally and in writing on 'numerous occasions'. 'This is not something that has been communicated recently,' he said."

The article also quotes BayStar as saying, when asked if they would go to court, that they are looking at "all necessary and potential" options against SCO:

"'We are committed to taking all appropriate steps necessary for our investors,' the spokesperson said, adding this the first time, out of more than 100 investments, that BayStar has actually sought its money back."

Just as I was skeptical of SCO's story, I am skeptical of BayStar's also. I have been wondering if their decision might be an indication that they are not happy with the Bert Young appointment, in addition to other possible reasons. What started me thinking is some research into Mr. Young's previous employment history.

In the press release announcing Bert Young as the new CFO, SCO seemed a little vague about Mr. Young's prior work history, mentioning that he had worked at "several other companies", but not listing them all, which seemed unusual. The way they phrased it caught my attention:

"Young brings to SCO a seasoned background in executive-level management responsibilities from a variety of information technology companies including worldwide finance, operations, mergers and acquisitions expertise.

"Previous to SCO, Young was the Vice President and Chief Financial Officer for LANDesk Software, where he was accountable for all financial management and reporting to company stockholders. He has also served as CFO for several other companies including Talk2 Technology, Inc. and Whittman-Hart. He was also the CIO for Chicago-based Waste Management, Inc."

That naturally made us all curious to fill in the blanks. We have succeeded, I believe, in discovering why not all the companies were listed. This was a group effort -- I have been deluged with email.

First, to demonstrate that we are talking about the same Bert Young, here is a snip from Mr. Young's bio when he was CFO of LANDesk Software, Inc. [1] You'll note that his background includes a mention of his stint at Whittman-Hart, just as the SCO press release does, but this bio adds a significant detail that SCO failed to mention, that Whittman-Hart after a merger changed its name to marchFIRST:

"Most recently, Young was CFO for Talk2 Technology, Inc., two fast-growing technology start-up companies where Young was responsible for, among other things, turning venture capital into positive cash flow, managing steep growth curves and satisfying auditors. Prior to that, Young was CFO for Whittman-Hart, where he oversaw the $7 billion merger between Whitman-Hart and USWeb/CKS that led to the formation of marchFIRST, a company with over 9,000 employees in 70 offices in 14 different countries. Young directed the integration of the two companies' financial and accounting systems.

"Young has served as CIO for Chicago-based Waste Management, Inc., and spent three years in London as senior director of information systems for Waste Management International."

Perhaps it will be news to you there were some significant financial issues at marchFIRST, which went bankrupt, and which have resulted in lawsuits with Mr. Young named as one of the defendants, charged with corporate waste and breach of fiduciary duty, among other things. The lawsuits are ongoing. The most recent event was a hearing this month. eWeek mentioned marchFIRST's unfortunate bankruptcy:

"Prior to that, Young was CFO for Whittman-Hart, an application service provider, where he oversaw the $7 billion merger between Whitman-Hart and USWeb/CKS that led to the formation of MarchFirst, a company with more than 9,000 employees in 70 offices in 14 countries. Young directed the integration of the two companies' financial and accounting systems in 2000. After a high-flying start that saw MarchFirst's stock zoom to a high of $81.13, the company's stock plummeted in the dot-com crash and it filed for Chapter 11 bankruptcy on April 12, 2001. MarchFirst was unable to set itself right and never emerged from bankruptcy."

Not only did marchFIRST never set itself right, the trustee ended up suing Mr. Young, along with several other defendants, for corporate waste and breach of fiduciary duty. You can read the complaints and the answers:

  • Complaint, Andrew J. Maxwell, Chapter 7 Trustee for the bankruptcy estate of Debtors, vs. Robert F. Bernard, Robert Clarkson, Edward F. Szofer, Bert B. Young, Paul D. Carbery, Mark Kvamme, Joseph Marengi, W. Barry Moore, David Storch and John R. Torell, III, Case No. 01-24742, Adversary No. 02A00194, Chapter 7, United States Bankruptcy Court, Northern District of Illinois, Eastern Division, Filed Feb. 26, 2002
  • Answer, Filed March 31, 2002
  • Complaint to Avoid Fraudulent Transfer3 and for Declaratory Judgment, Andrew J. Maxwell, Chapter 7 Trustee for the bankruptcy estate of Debtors, v. Robert F. Bernard, Robert Clarkson, Edward F. Szofer and Bert B. Young, Complaint to Avoid Fraudulent Transfers and For Declaratory Judgment, Case No. 01-24742, Adversary No. 03A01412, Chapter 7, United States Bankruptcy Court, Northern District of Illinois, Eastern Division, Filed April 11, 2003
  • Answer, Filed June 12, 2003

The overview is presented in the Introduction section of the 2002 Complaint:

"Management also engaged in a variety of conduct designed to create the impression that marchFIRST was enjoying success in the marketplace when it was really in deep financial trouble. The misimpressions were fostered by inappropriate venture investments, improper income recognition (abuses of 'roundtripping'), overhiring, excessive real estate spending, and a variety of other corporate waste. . . . . This facade of success came at the cost of wasting untold millions of dollars by building an infrastructure for growth that did not exist at marchFIRST. Those abuses continued and accelerated while marchFIRST was in the vicinity of insolvency. Management and the Board of Directors of marchFIRST recklessly, intentionally and knowingly breached their duties to the company and its creditors."

At the heart of the 2003 Complaint to Avoid Fraudulent Transfers is the charge that marchFIRST and Young and another defendant signed mutual releases, attached to the Complaint as Exhibit A, which the Trustee alleges were entered into with an intent to "hinder, delay and defraud" the creditors and which the defendants raised as a defense in response to the first Complaint alleging breaches of their fiduciary duty. The complaint also mentions that the Agreement accelerated the vesting of Young's stock options and allowed the options to remain exercisable for 6 months following Young's leaving the company and that the Agreement was entered into at a time when marchFIRST was already insolvent:

"After the Insider Directors had caused marchFIRST's financial decline through their breaches of their fiduciary duties, they colluded to attempt to deprive marchFIRST of legal recourse against them. Upon leaving their employment with marchFIRST, Defendants Clarkson and Young entered into Separation Agreements with marchFIRST, in which marchFIRST purported to release both Clarkson and Young from causes of action arising out of their employment with marchFIRST....

"On information and belief, the Agreements with Young and Clarkson were made:

(a) with actual intent to hinder, delay or defraud its creditors; or
(b) without receiving a reasonably equivalent value in exchange for the Agreements at a time when:
(1) marchFIRST was insolvent, or became insolvent as a result of the Agreements; or
(2) marchFIRST was engaged or was about to engage in a business or a transaction for which its remaining assets were an unreasonably small capital in relation to such business or transaction; or
(3) marchFIRST intended to incur or believed that it would incur debts beyond its ability to pay as they came due."

The complaint alleges that Young and the two others defendants "breached their fiduciary duties of loyaty, which as officers and directors they owed to marchFIRST, by entering into the Young and Clarkson Agreements":

"33. The highly unfavorable terms of the Separation Agreement injured marchFIRST. marchFIRST gained only a release of claims, none of which actually existed, by Young and Clarkson, while in return provided them with vesting stock options, and release of liability for their numerous and egregious breaches of fiduciary duties. Such a transaction was not fair to marchFIRST, and could only have resulted from Insider Directors' bad faith.

"34. The Separation Agreements served only the personal needs of the Insider Directors, not those of marchFIRST."

There is a lot at stake here. According to paragraph 27 of the complaint, the agreements, if enforced, "would constitute a release of claims against Clarkson and Young worth at least tens of millions of dollars, in exchange for which marchFIRST rreceived from Clarkson and Young only a release of Clarkson and Young's claim against marchFIRST, which claims have no value."

marchFIRST was a high-flying dot com, that had many well-known companies as customers, such as Apple and Saks Fifth Avenue, and IBM, Novell (who reportedly lost millions), and Microsoft (who loaned them money) as partners. Many reports at the time of its demise viewed it as a victim of the bubble bursting. In fact, it made it into the Museum of E-Failure, as an example of that era's dot com busts. It seems to have been the VC guys, Francisco Partners, who pulled the plug, forcing management changes and then selling pieces of the company in an attempt to protect their investment. But after the Trustee filed his complaint, the news coverage began to change:

"The filing charges Bernard and the other company officials with 11 counts of breach of fiduciary duty.

"According to one charge, the company engaged in a financial practice known as 'roundtripping,' where MarchFirst invested in a start-up company only to have the firm hand the money back for MarchFirst's consulting services.

"The MarchFirst executives created a new company, named Bluevector Strategic Partners LLC, to use as a 'conduit whereby MarchFirst could use its own funds to improperly book revenue,' according to the filing.

"Bernard and other company officials authorized Bluevector to invest approximately $19.8 million from MarchFirst in 14 companies that used MarchFirst services.

"'In each and every instance, BVSP invested funds in customers of MarchFirst that simultaneously repaid the money back to MarchFirst for work MarchFirst was to perform for the customer in the future,' the filing alleged.

"The gambit, Maxwell concluded, gave investors and analysts a false impression of the company's financial health.

The 2002 Complaint talks about Bluevector and says not only was it a bad investment for marchFIRST, the existence of Bluevector wasn't mentioned in the company's SEC filing:

"Defendants Bernard, Young and Shelow, acting in their capacity as officers caused marchFIRST not to disclose to shareholders of the company in the company's Form 10-Q filed for the first quarter of 2000, the existence of Bluevector or marchFIRST's obligation to contribute approximately $87 million to Bluevector. "

The Complaint also alleges that the deal was over and done without prior Board approval. There were even in the media allegations of skimming, hiding assets, puffing the books. Employees of the company blogged and commented on the Internet, and the common thread was that they had nothing meaningful to do there, that they were "on the beach". The 2002 Complaint alleges that the company deliberately overhired to create a false impression of growth and profitability. Then it charges that just before filing for bankruptcy, the company "authorized raises and retention bonuses to management employees and to themselves." By the time this occurred, Young had left the company. However, the complaint does allege that he was involved in overinvesting in real estate to build a huge corporate headquarters to "maintain the illusion of marchFIRST's growth and success." And if you read page 38 - 46 and 48, it lists some other allegations regarding his actions, including allegations of dissemination of false and inaccurate information.

When the company went bankrupt, it was a Chapter 11, but then it was converted to a 7, when someone reportedly threatened to sue them if they kept selling off assets, an issue also mentioned in the Complaint:

"ANB reportedly threatened marchFIRST's officers and directors with personal liability if the company continued to sell off its assets. In addition, the company's CFO Michael Salvati resigned his position last week. MarchFIRST said these events led the company to convert to Chapter 7 and begin to liquidate the remaining assets."

Microsoft and Credit Suisse First Boston were the two largest creditors. Just before the company went down in flames, Credit Suisse made this announcement reported in, of course, Forbes:

"MarchFirst, the embattled Internet consulting firm, shot up 60% in heavy trading this afternoon after Credit Suisse First Boston reinstated its coverage of the stock with a 'buy' rating.

"Chicago-based MarchFirst (nasdaq: MRCH - news - people) was trading at $3 early this afternoon, after closing at $1.88 on Jan. 19. The stock has been a prominent victim of the dot-com collapse, falling precipitously from its 52-week high of $54.

"Today's vote of confidence from Credit Suisse First Boston analyst Mark Wolfenberger was the first bit of positive news the company has received in months. Just two weeks ago, the stock took another hit after the company announced a second round of layoffs. But Wolfenberger says that MarchFirst's turnaround plan appears to be on track, which means the stock is undervalued at its current bargain-basement price. He set a 6 to 12-month price target of $8."

Sound familiar?

The 2002 Complaint, paragraph 33 is of interest too, because it alleges that they company had a paragraph in its certificate of incorporation, the so-called "raincoat provision":

"As the surviving entity in the Merger, marchFIRST succeeded to the Whittman-Hart certificate of incorporation, which contains a provision adopted pursuant to Section 102(b)(7) of the Delaware General Corporation Law that modifies the standard of care members of the Board of Directors owed the company and its shareholders (sometimes called "raincoat provisions"). This amendment to the certificate of incorporation did not affect the duties owed by officers to the company and its shareholders; and did not affect the duties and responsibilities that both officers and directors owe to creditors of the company. As will be described in this Complaint, certain members of the marchFIRST Board of Directors and certain officers failed to meet the obligations they owed to marchFIRST and its creditors."

This Complaint, in paragraph 53, says there was a class action by shareholders filed against marchFIRST, in fact a number of them (9 at least), consolidated into Sutton, et a., v. Bernard, et al., No.00 C 6676, pending in the United States District Court for the Northern District of Illinois, asserting several claims including securities law fraud, which, upon investigation, I find has been stayed pending the bankruptcy action being finished. Then it picks up again. Here is what that case charges:

"According to a press release, The complaint alleges that Defendants made a series of materially false and misleading statements in: press releases, statements to stock analysts, and SEC filings. The misrepresentations concerned: the Company's second quarter 2000 financial results; its improving business momentum, its ability to meet analyst expectations for third quarter performance, and the quality of its accounts receivables. As a result, marchFIRST's stock price was artificially inflated throughout the Class Period."

Young was Chief Financial Officer and Treasurer of marchFIRST for part of 2000. Prior to the merger of Whittman-Hart and USWeb, Young was Chief Financial Officer of Whittman-Hart. According to the first Complaint, the 2002 one, Young and the other defendants were alleged to have wasted corporate assets:

"69. The Defendant officers misused marchFIRST's assets to create and perpetrate this facade of success in a number of different ways, including but not limited to the following:

A. Embarking on a massive program of overhiring consultants to create an appearance of demand for marchFIRST services when in fact there was no work for such consultants and employees, so that employees and consultants were put "on the bench," i.e. instructed not to come to work (or to come to the office but remain idle) while remaining on the marchFIRST payroll;

B. Spending tens of millions of dollars for the development of grandiose corporate headquarters in downtown Chicago;

C. Entering into unnecessary lease commitments that had to do with projecting an image of growth rather than company need, even after marchFIRST was confronting a severe liquidity crisis; and

D. Leasing and operating a corporate jet.

70. Defendants' waste of corporate asets was so egregious and irrational that the decisions could not have been -- and in fact were not -- based on any defensible assessment of what was in the best interest of marchFIRST. . . .

78. Not only did management engage in a massive hiring campaign to create the illusion of corporate growth, Bernard, Szofer, Clarkson and Young failed to take action in a timely fashion to reduce its idle workforce, even though marchFIRST was operating at a negative cash flow. For example, for the nine months ending September 30, 2000, net cash provided by and used in operating activities was negative $79.8 million. . . .

113. Defendants Bernard, Szofer, Clarkson, Young and Shelow, in their capacities as officers of marchFIRST, breached their fiduciary duty of due care by failing to put into place adequate internal controls. The lack of even the most rudimentary internal controls exacerbated the waste of corporate assets and severely limited marchFIRST's ability to collect for those projects its workforce did perform.

114. Moreover, Bernard and Young disclosed to the public inaccurate information about the status of integration. For example, in the second quarter of 2000, Bernard and Young disclosed that marchFIRST had made "great strides" in completing the Whittman-Hart/USWeb integration, and that such integration would be virtually complete by the end of the third quarter of 2000. At the October 24, 2000, analyst conference call, Bernard represented that marchFIRST completed its integration.

I hasten to add that Mr. Young has denied all the charges, as you can see in the answers to the complaints, and we'll have to wait and see how it all plays out. Being accused isn't the same as being found guilty. But it is also true to say that charges like this aren't something you see under every bush, although these days it is sadly not unheard of.

The point of all this is just this: Microsoft knows this story. They were there. Hearing that Bert Young has been named the CFO of SCO may not be a thrill to them. We know there is a relationship between BayStar and Microsoft of some kind, so what Microsoft knows, no doubt BayStar knows. It seems conceivable that BayStar is worried about its investment. The Complaint is seeking both actual and punitive damages. SCO did not mention Mr. Young's history at marchFIRST in its press release, or the lawsuits, and it will be interesting to see if this information makes it into their SEC filings.

UPDATE: BayStar is quoted today in this EnterpriseLinuxIT article, when asked about Bert Young's appointment:

"Although voicing resistance to BayStar's recommendations, SCO did announce on April 21st that it had hired a new chief financial officer, Bert Young. Young was previously CFO at LANDesk Software. [BayStar spokesperson Bob] McGrath declined to comment on that change, noting only that 'I think our issues, broadly, are still there.'"

And SCO has also answered BayStar's complaint that it talks too much publicly:

"The company also rejected claims by BayStar that its statements to the press regarding its intellectual property claims have been too frequent or too grand.

"'SCO is a publicly traded company and as such, we have an obligation to our shareholders to disclose material events that take place. As a company, we will continue to disclose information as it becomes available and this will frequently be reported on through the media,' the statement continued. 'This includes information concerning our Unix business, our litigation and the intellectual property issues that currently face Linux. We will continue to conduct our litigation through the courts with the strong legal team that we have in place, while also continuing to disclose material information to our shareholders.'"

How very apt. And true. They do have an obligation to disclose material information as it becomes available.


1. Up until this morning at around 12:30 AM, it was available in Google cache, but it has now disappeared. I do have a saved local copy. The original page no longer exists.

Update: If you search for that page on Archive.org, you will find, after clicking on all the links that it was on the day this article was published, April 26, 2004, that the page was taken down. Here's how it looked that same year, on February 17th, two months' prior to this information being published. Here's some info on Waste Management International, including a judge calling the company out for "a culture of fraud and dishonesty".


  


BayStar, Bert Young, and marchFIRST | 216 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here Please
Authored by: PJ on Monday, April 26 2004 @ 12:06 PM EDT
Please leave corrections here in this thread, so I can find them quickly.
Thanks.

[ Reply to This | # ]

BayStar, Bert Young, and marchFIRST
Authored by: joef on Monday, April 26 2004 @ 12:12 PM EDT
He seems to be highly qualified to work as Baystar's proxy at SCOG.

[ Reply to This | # ]

New Links, etc. here
Authored by: bruce_s on Monday, April 26 2004 @ 12:12 PM EDT
New links here.

[ Reply to This | # ]

BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Monday, April 26 2004 @ 12:22 PM EDT
Sounds like a perfect fit for SCOX.

[ Reply to This | # ]

eweek mentions the MarchFirst connection, too
Authored by: Anonymous on Monday, April 26 2004 @ 12:22 PM EDT
http://www.eweek.com/article2/0,1759,1571460,00.asp?kc=EWRSS03119TX1K0000594

[ Reply to This | # ]

BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Monday, April 26 2004 @ 12:24 PM EDT
Just the kind of guy McBride would pick to carry out this scam. SCO is trying to
scam everyone.

[ Reply to This | # ]

BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Monday, April 26 2004 @ 12:28 PM EDT
OT - totally YANKEE GROUP and Laura D

I didn,t know where to post.

They have an online discussion tomorrow hosted by Laura D. on TCO and various
other issues.

It needs registration ASAP. Apparently, their online seats are limited???? I
suppose i can understand why.

See the Yankee Group site for details.


Brian S.

[ Reply to This | # ]

marchFIRST
Authored by: TFBW on Monday, April 26 2004 @ 12:31 PM EDT
I love the text on the Museum of E-Failure screenshot.

"marchFIRST is a global professional services firm that
delivers customer outreach and enterprise improvement
solutions for Global 3000, mid-market and emerging
companies."

"marchFIRST helps clients connect with their customers,
optimize their business infrastructure and maximize their
existing assets."

Sure, but what do they DO?

[ Reply to This | # ]

Background on being on the bench
Authored by: Anonymous on Monday, April 26 2004 @ 12:38 PM EDT
I used to work for an IT consulting firm, where I became familiar with the term
"on the bench." I was on the bench myself for several months at one
point, meaning that the firm had no assignments for me at the moment, but kept
me on the payroll in the hope that something would turn up.

The time was not completely wasted. I worked on some proposals, and I spent
time on a PC in the corner becoming more familiar with C. From time to time I
went on interviews, and eventually got another assignment.

Not everyone was so fortunate. I remember at least one person who stayed on the
bench too long and was let go.

The point: keeping people on the bench is not, in itself, a bad idea, nor is it
a sign of mismanagement. Different firms have different policies, but it's not
at all unusual for a consulting firm to have a number of people on the bench at
any given time. When IT pros are in short supply, it makes sense to carry them
on your payroll for a while, because you have a good chance of finding
assignments for them again -- and because they'll be hard to replace if you let
them go.

Obviously you can overdo it, as MarchFIRST reportedly did. I am not trying to
defend MarchFIRST or Mr. Young, only to provide some background.

In any case, being on the bench is certainly demoralizing. The firm I was with
found it necessary to come up with a euphemism. We weren't "on the
bench;" we were "on deck."

Scott McKellar
http://home.swbell.net/mck9/sco/

[ Reply to This | # ]

How far he has fallen
Authored by: Peter Smith on Monday, April 26 2004 @ 12:42 PM EDT
The fact that Bert Young found it necessary to take employment with SCO shows
just how far and hard he has fallen.

[ Reply to This | # ]

Wait a minute, wait just a minute..
Authored by: Anonymous on Monday, April 26 2004 @ 12:49 PM EDT
2. Up until this morning at around 12:30 AM, it was available in Google cache, but it has now disappeared. I do have a saved local copy. The original page no longer exists.

The google cached copy of the LANDesk bio for Bert Young is missing?

Your search - cache:5Tlf0ErjR9gJ:www.landesk.com/corporate/company_profile/executives/bert_you ng.php bert young marchfirst utah state - did not match any documents.

How can this be?

Does anyone know how google's caching works? I was always under the impression that they cached pages for -- ever? -- not really, but for a long time anyway...

It's getting to be 'way too easy to just go off the deep end and become completely paranoid about *everything* :-/

t_t_b

---

Mad cow? You'd be mad, too, if someone was trying to eat you.

[ Reply to This | # ]

Bert Young + SCO
Authored by: Anonymous on Monday, April 26 2004 @ 12:52 PM EDT
Birds of a feather, flock together.

Especially vultures.

[ Reply to This | # ]

Lindows revisited?
Authored by: tintak on Monday, April 26 2004 @ 12:59 PM EDT
For a company that is so keen to prevent customer confusion with regard to the
word windows, M$ has made a 'strange' choice of name for its new European
research centre!

"MICROSOFT HAS officially opened what it calls the "European Microsoft
Innovation Centre," – or the EMIC – in Aachen, Germany." from The
Register
http://www.theinquirer.net/?article=15535

"About Emic
Emic offers grid computing solutions for open-source web platforms and
applications built on SQL databases and web servers."
http://www.emicnetworks.com/

Purely coincidental? What do you think!

---
'it is literally impossible' for SCO to itself provide
direct proof' Mark J. Heise 02/06/04

[ Reply to This | # ]

For a Laff
Authored by: Tim Ransom on Monday, April 26 2004 @ 01:00 PM EDT
Eleutherophobic Rob Enderle's penetrating analysis of the Baystar/SCO situation is available on technewsworld.

Caveat:

Of course, Ol' Rant for Rent knows less about the story than your average Groklaw reader, and his 'analysis' is of zero nutritional value, so reading him for any reason beyond his inadvertant entertainment value is a waste of time.

---
Thanks again,

[ Reply to This | # ]

BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Monday, April 26 2004 @ 01:03 PM EDT

Fantastic reporting, PJ. Thanks for all your work and the information you
provide.

[ Reply to This | # ]

Another SCO WINNER!
Authored by: kberrien on Monday, April 26 2004 @ 01:07 PM EDT
Only executives from SCO, would hire an executive like this. Generally, change is supposed to be for the good. As nothing good has happened to SCO in the past years (except the stock price) this isn't much of a surprise.

Great investigative work people! We like to complain about the press, and their coverage. I can tell you now, its bad enough for a reporter to be scooped by another reporter, but imagine how they feel when his/her readers are getting all the scoops!

[ Reply to This | # ]

Misdirection, Perhaps?
Authored by: howard_b_golden on Monday, April 26 2004 @ 01:10 PM EDT
The secret of magic is misdirection. Perhaps BayStar's request for its money back is merely a ruse. Here's one possibility:

Suppose Microsoft is really funneling the money to BayStar. In other words, BayStar isn't really concerned with getting its money back. However, Halloween X has cast the light on BayStar and MS as funding SCO. This is not what MS wants anyone to believe. So MS has BayStar demand its money back, knowing all the while that SCO isn't going to give it back. This provides cover for BayStar. It can now claim that the SCO investment was really because BayStar thought that Boies could convince a bunch of Utah yokels to vote for SCO against IBM. It also takes the heat off the accusation that MS is funding the whole show.

See! It's misdirection! If you think this hypothetical is totally implausible, you don't know MS's history. I'm not saying I've convinced myself that my plot line is what's happening, but I'm definitely leaning in that direction.

[ Reply to This | # ]

Re: BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Monday, April 26 2004 @ 01:10 PM EDT

As a Chicago area resident, I was aware of Whitman-Hart's troubles. I wasn't aware, though, that Young was reputed to have played such a big role with their downfall. (I knew one of the recruiters at W-H from college and had toyed with the idea of submitting a resume to them back in the mid-90s. Darned glad I didn't once I started reading about the burn rate that these guys were engaged in. He's working for another firm now.) The Chicago Tribune and, I think, Crain's had a bunch of stories about the flame out of this company. Pretty disgusting reads as I recall.

What I find interesting about this is that it answers the question that eventually gets asked:

``Who's going to hire [fill in the name] after this fiasco?''.

Why companies like SCO will hire people like Young. And who will hire a bunch of SCO execs once they destroy the company? Well let's see... companies without an once of scruples, like Forgent and Rambus, come to mind.

[ Reply to This | # ]

Incompetence Or What?
Authored by: jm on Monday, April 26 2004 @ 01:22 PM EDT
I'm confused - no, make that amazed. Why would TSG bring on board a guy with
hands this dirty? Anything but the most casual due diligence effort would have
revealed that Young is the kind of CFO that makes investors nervous. Even if
Darl & co. wanted a master accounting chef, this guy's track record is
sufficiently obvious to make such skulduggery nigh unto impossible. So, the
only explanation that makes any sense to me is that good ol' Bert is the only
buddy McBride could find to drink the koolaid...

[ Reply to This | # ]

BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Monday, April 26 2004 @ 01:25 PM EDT
Methinks BayStar is not bluffing SCO about legal action. The relationship has
deteriorated to the point of public accusations, not something you do lightly
(pay attention SCO) if you ever want to have normal relationship with that
company again.

Perhaps BayStar is worried that Young is being brought in to SCO on a mission to
restore SCO to their "glory days" (as if Caldera ever had any), and
suddenly they will be shifting millions into non-legal spending towards that
goal. Dot-bomb all over again.

[ Reply to This | # ]

Emron #2
Authored by: Anonymous on Monday, April 26 2004 @ 01:29 PM EDT
forming right here folks

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  • No tooo small. - Authored by: Anonymous on Monday, April 26 2004 @ 07:04 PM EDT
Open Source Law!!!
Authored by: rvergara on Monday, April 26 2004 @ 01:37 PM EDT

I just read an excellent article in ZDNet UK, I quote their conclusion:

"The rules of the game for future players are now ice-clear: anything you
say will be taken down and analysed for thousands of hours by people with access
to all the resources of the Net. You better be right, or you better keep quiet:
justice, free software style. Today is the day the law went open source."

see complete article at:

http://comment.zdnet.co.uk/0,39020505,39152776,00.htm

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Did IBM connect them?
Authored by: Anonymous on Monday, April 26 2004 @ 01:55 PM EDT
I wonder if IBM connected Darl and Young early on, and this may have been a
factor in IBM's decision to fight?

I've seen vague reports that Darl and Young had crossed paths before Darl went
to SCO.

I do hope, too, that the SEC perks up its ears at the Young appointment and that
IBM is sharing whatever it may have with the SEC.


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You Might Be A SCOundrel If...
Authored by: BrianW on Monday, April 26 2004 @ 01:58 PM EDT
This is quite fascinating. Thanks, PJ. It seems that I must give Darl (&
minions) a bit of credit, however. At least Darl, unlike his BayStar financers,
recognizes the importance of giving public lip service to the notion of having a
respectable "core business".

And along those lines, I fed all the recent news into my Artifical Intransigence
program (aka RoboDarl), and it spat out the following:

You might be a SCOundrel if:

…your lawyers bring up the subject of “combat pay” every time you give an
interview.

…the second item on your To-Do list is: “Invade Poland.”

…your lawyers are not as easily dismissed as they once were when you tell them,
“I don’t know. Just make something up.”

…you think the wolf in _The Three Little Pigs_ is the protagonist.

…you don’t get the story about the scorpion and the frog crossing the river.

…someone gives you a Pink Panther tee-shirt, telling you that they couldn’t kill
Inspector Clousseau, either.

…you quit wearing the tee-shirt when you finally figure out what that means.

…you are relieved every month when you open the envelope and discover it’s
nothing more than just your credit card statement from Bank Of America.

…you’re wondering why BayStar has a problem with you when you both agree that
litigation is a viable source of long-term business revenue.

…you wish you could go back to the days when all you had to deal with were
server outages and prank calls during the Superbowl.

…despite the fact that your last two open letters have yet to make it to public
venue on your company’s web site, you assure others that they have been met with
unanimous delight and approval by the silent majority.

…you’ve instructed your bodyguards to stop asking you where all the menacing
geeks are.

…you’re SO relieved when you find out that one of your largest investors has a
problem with you not being despicable ENOUGH.

…your lawyers seem to think that you mean “stupid” when you use the term
“pre-emptive” to describe the idea of suing the Attorney General.

…you recently emailed one of your minions asking him if the correct spelling is
“Shmee-P-L” or “Shmee-Pee-Ell”.

…you’re trying to figure out how “Dropping the UNIX Business” can be portrayed
as a “UNIX Method”.

…after watching “The Princess Bride” with your family over the weekend, you
decide to quit using the word “inconceivable” in your staff meetings.

…your recent exchange with Eben Moglen about legal matters has given you enough
confidence to call up Stephen Hawking to tell him a thing or two about physics.

And finally:

…the shirt on your back is starting to look pretty good right about now.

;-)

---
//Brian
#define IANAL

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Joseph Marengi at Novell and marchFIRST
Authored by: Winter Owl on Monday, April 26 2004 @ 02:01 PM EDT
The complaint against MarchFirst lists Joseph Marengi as a defendent. He is
listed in the complaint as a member of the Board of Directors and was on the
audit committee of the Board of Directors. Is this the same Joseph Marengi who
was president and Chief Operating Officer of Novell in 1996 and 1997?

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OT: SCO hires locals only?
Authored by: Anonymous on Monday, April 26 2004 @ 02:11 PM EDT
I did a little searching for Bert Young and LANDesk on Dogpile.com and I noticed
that LANDesk is in Utah also. So I'm to assume that Darl & co. won't pay
for moving expenses? Or is it that if you are in Utah, and have any type of
litigation on your resume then SCO will hire you?

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SCOX signs Anthony Soprano as CFO
Authored by: Anonymous on Monday, April 26 2004 @ 02:29 PM EDT
SCOX signs Anthony Soprano as CFO

Brings new finance under unusual terms

Lindon, UT, April 21st: The SCO Group announced today that Anthony 'Tony' Soprano, from the long-running fictional HBO series The Sopranos, would be taking over from Robert Bench as Chief Financial Officer. Soprano comes from a highly tax-efficient Chicago 'Waste Management' background and is a legitimate businessman.

"We're gonna... 'retire' Bench,", announced the physically intimidating legitimate businessman Soprano at the press conference, while beside him Undead CEO and Charnelman McNugget - who seemed more blanched than usual - stared at the table. "Seems our friends here are having some money problems, I'm gonna take care of that, leave it to me." stated Soprano with his dangerous, raptor-like grin.

Soprano brings with him an unusual financing arrangement for the ailing SCO Group -- even more unusual than the Pipe deal which seems to be imploding at the moment. Soprano has announced a $10M line of credit to the untouchable pariah company with a little-used financial instrument known as 'vig'. More commonly seen in loansharking deals, 'vig' involves daily cash interest payments - rumoured to be 0.25% per day - to angry men carrying weapons.

Longtime SCOX observers have now basically lost the capacity for surprise and reacted to the news with a shrug. "They are so hated, so doomed, so still shuffling along after death, " said one Linux programmer who asked for him name to be withheld, "it's no surprise they had to turn to desperate sources of financing after the pipe deal went south. No normal financial institution will have anything to do with the shuffling Undead. Not even DB."

The SCO Group began struggling even for its miserable existance after Death last week when Baystar, one of the two investors in the Pipe deal, demanded its money back, prompting an statewide emergency plan to try to contain the expected value implosion with a Chernobyl-style concrete sarcophagus around SCOX headquarters. So far SCOX has shed around 35% of its value in a couple of weeks and the decline is continuing, humbling the once blustering company with a sub-$100M valuation. As the share price passed $6.66, rumours surged on a connection to the ongoing SCOX negotiations with the Devil, but this was denied by McNugget.

Legitimate businessman Soprano and his retinue of cigar chomping associates has already taken over the suite of offices formerly occupied by McNugget and the other Undead execs Shovel and Pricetag. "The existing business plan sounds fine to me -- threaten innocent people and shake them down for money. What has been missing is - heh - 'execution'. One of my first moves will be to form a Rapid Response Contract Strike Force team that will visit customers and ... check compliance to any contracts. After we make an example of the first few I'm sure the others will start paying for this IP, whatever it is." Soprano associate Paulie Walnuts added, "Yeh -- and we'll pee in your eye, too, ya cheap f--ks."

In related news, Gregory Blepp is reported missing after last been seen taking up Soprano associates Christopher Moltisanti and Silvio Dante's kind offer of a ride in their nice car.

(Originally posted to the Yahoo SCOX board, see http://warmcat.com/alt.scox for more stupid parodies)

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Waste Management sued by the SEC for "massive fraud"
Authored by: seeks2know on Monday, April 26 2004 @ 02:50 PM EDT

When I read that Bert Young served as CIO for Waste Management, I immediately recalled that Waste Management was no stranger to the SEC.

In May of 2002, the SEC filed suit against Waste Management charging it's founder and five other former top officers with "massive fraud".

"Our complaint describes one of the most egregious accounting frauds we have seen," said Thomas C. Newkirk, associate director of the SEC's Division of Enforcement. "For years, these defendants cooked the books, enriched themselves, preserved their jobs, and duped unsuspecting shareholders."

The information above does not provide dates of service for Mr. Young at the company, so I am unable to determine whether he was present during the 1992-1997 period covered by the suit.

But there does seem to be a pattern here.

---
There is but one straight course, and that is to seek truth and pursue it steadily."
-- George Washington

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Waste Mangement
Authored by: shareme on Monday, April 26 2004 @ 03:07 PM EDT
Was Bert Young there when the massive accounting fruad was found on Waste
Mangmeent books?

I believe the auditor that got into trouble was the saem now defunct Chicago
Accounting Frim..

---
Sharing and thinking is only a crime in those societies where freedom doesn't
exist.

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SCO's raincoat provisions
Authored by: paul_cooke on Monday, April 26 2004 @ 03:11 PM EDT
ISTR that SCO mad a fuss of granting their top
execs/directors immunity for actions they were carrying
out but I'm damned if I can find a link anymore to the
news article that announced it.

---
Use Linux - Computer power for the people: Down with cybercrud...

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Bert Young & Waste Management
Authored by: piskozub on Monday, April 26 2004 @ 03:15 PM EDT
According to The Economist:

"The question is: for how long? Up to a point, activist funds rely on clever stock-picking. Over the long term, it is hard to beat the market this way. Their additional tactics, such as proxy battles, are expensive in terms of time and cash. Ralph Whitworth of Relational Investors became chairman of Waste Management, a rubbish-disposal firm, in 1999 when the company faced an accounting scandal and accusations of insider trading soon after a messy merger. Relational Investors did well from the subsequent rise in Waste Management's share price, but it took an inordinate amount of Mr Whitworth's time, making it difficult for him to focus on other investments."

It's very interesting when exactly Bert Young worked in Waste Management...

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Young claimed credit for BlueVector
Authored by: AllanKim on Monday, April 26 2004 @ 03:41 PM EDT
Here's something I originally posted Wednesday on the first Bert Young thread.
Note especially the quote: "Any risks involved in these investments do not
come back to us or our shareholders." Does this remind us of another
company?

http://www.eprairie.com/printer/article.asp?newsletterID=74

'Outsourcing' Venture Capital Investments
Published on 4/18/2000

With an eye toward astronomical investment returns and equity positions in the
start-ups they advise, consulting firms are aggressively pursuing venture
capital investments. While the current fashion is to launch investment funds
in-house (witness AC Ventures and the Scient Accelerator Program), Chicago-based
MarchFirst (http://www.marchfirst.com) prefers to 'outsource' its VC
activities.

"We are Internet strategists, not investment bankers," said MarchFirst
Chief Operating Officer Bert Young. "For us, the right way to go about
venture investments is to partner with somebody else, and maintain a significant
investment in that company."

To that end, MarchFirst committed $50 million and its existing slate of Internet
portfolio companies for a 50% equity-stake in BlueVector LLC, a newly formed
venture firm led by former Credit Suisse First Boston
(http://www.credit-suisse.com) Managing Directors Mike Tunstall and Joe
Josephson. BlueVector also has a right of first refusal agreement on MarchFirst
clients seeking to raise capital.

Young cited the restrictions of owning more than 20% of any portfolio company as
to why MarchFirst bundled its investments in an outside entity.

"We don't want to run the risk of generating losses for the company,"
he said. "Any risks involved in these investments do not come back to us or
our shareholders."

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So Many "Green Chicken" Stores All In The TSG Story!?!
Authored by: Anonymous on Monday, April 26 2004 @ 04:03 PM EDT
This is exactly how the mob runs businesses.

Is there a Morman mob?

Is Chicago into Microsoft?

Is the IT industry next?

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BayStar, Bert Young, and marchFIRST
Authored by: blacklight on Monday, April 26 2004 @ 05:43 PM EDT
"'We are committed to taking all appropriate steps necessary for our
investors,' the spokesperson said, adding this the first time, out of more than
100 investments, that BayStar has actually sought its money back."

Stage 1: SCOG takes away Baystar's money.
Stage 2: SCOG takes away Baystar's dignity.
Stage 3: SCOG takes away Baystar's reputation.
Stage 4: Baystar loses its innocence, and realizes that it has not only lost its
dignity and reputation but paid SCOG $20 mil for the privilege. This is
Baystar's stage of awareness.

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Roundtripping
Authored by: AJWM on Monday, April 26 2004 @ 05:45 PM EDT
"According to one charge, the company engaged in a financial practice known as 'roundtripping,' where MarchFirst invested in a start-up company only to have the firm hand the money back for MarchFirst's consulting services."

Oh, they certainly did that. I worked for a startup company which entered into such a deal with MarchFirst -- and we on the tech side wondered what in heck we were supposed to get for our million dollars worth (or maybe it was only half that) of web services consulting. Mind, the head of our company was such a weasel I'm not sure who was scamming whom.

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BayStar's McGrath
Authored by: JeR on Monday, April 26 2004 @ 06:33 PM EDT
"We've been communicating with the company for a number of months about the strength of the management team, the focus of company resources, and the business approach of its communications, and have not gotten responsiveness from the company," McGrath said.

Read more here ("SCO and BayStar: Irreconcilable Differences?" by James Maguire).

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Usight and Young mentioned on Yahoo
Authored by: KevinR on Monday, April 26 2004 @ 07:20 PM EDT
Someone on the SCOX Yahoo boards has been digging into Usight who got a one line
mention in a reply above.

It appears to be a place - or the place - Young was for the last couple of
years. Usight have been in a bit of trouble over their "Trading
Standards" to use a British Phrase. The mention of Usight appears to have
been edited out of the text about Young. Search of usight on the Yahoo SCOX
board. I think the posts where by stats_for_all.

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Stock Kiting and Baystar is Bad
Authored by: kawabago on Monday, April 26 2004 @ 08:13 PM EDT
At first we wondered if the SCO suit was part of a stock kiting scheme, Young's
CV would seem to support that.

Baystar admitted they wanted to tax Linux if they could get away with it so they
are EVIL!!!!! We should keep Baystar squarely between the crosshairs and keep
firing until they dry up and blow away.

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Soon we'll see the biggest rat of all....
Authored by: Anonymous on Monday, April 26 2004 @ 10:53 PM EDT
What an excellent site! Between PJ and the readership or "
investigators" I am amazed at what is found under just about every
"stone that is picked up".

When the SCO affair started, I was almost shocked by the surreal statements
coming out McBride and friends. All along though, I felt this was a scam. I was
not the only one, of course, but few could express this publicly.
I am so happy now that as facts come to light, one can start to legitimately
say: what an incredible fraud has been concocted....and in broad daylight too.
It is true that if you want to fool people you need to do it face-to-face and
with a big smile....and Darl has such a nice smile.almost
as nice as Gates'.

IBM must have sniffed a rat a long time ago...this thing could become just as
exciting as the hockey playoffs.
If only IBM hangs in there, and keeps tracing this charade to its source, I
would not be surprised if we find that the biggest rat of all (i.e. microsoft)
is behind the "SCO affair".

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BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Tuesday, April 27 2004 @ 01:59 AM EDT
"You can fool all of the people some of the time, and some of the people
all of the time, but you can not fool all of the people all of the time."
-Abraham Lincoln

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BayStar, Bert Young, and marchFIRST
Authored by: jamesw on Tuesday, April 27 2004 @ 06:40 AM EDT
PJ wrote:
We know there is a relationship between BayStar and Microsoft of some kind, so what Microsoft knows, no doubt BayStar knows.

I don't think this necessarily follows. Microsoft has a history of being economical with the truth, and of screwing companies that are allegedly partners. And once they've got some sort of hold over a company, they will use it as much as possible. The word "ruthless" would be polite.

I find it more plausible that Microsoft decided to do the dirty with someone else's money (to increase plausible deniability). So Microsoft would tell them enough of the positives, and not much of the negatives. "Yes, it is a high risk investment, but we think there's the possibility of a very big windfall, nudge wink."

As we've seen, once Baystar had put money into SCO, it was always going to be difficult for them to get it back. BayStar is committed, and has few options other than to write off the investment or to follow through with the lawsuit. Microsoft has them where they want them.

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No wonder Darl looks beat lately
Authored by: Anonymous on Tuesday, April 27 2004 @ 12:58 PM EDT
TSG accepted big money from heavy hitters. The M$ matchmaking
role is all the more surprising in this new light. Following the money
will explain much of these events. Who are the RBC investors? Why
did these investors use a Canadian bank to funnel their funds?

Darl, when you take people's money they expect it back with interest.

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BayStar, Bert Young, and marchFIRST - I Worked for marchFirst!
Authored by: Anonymous on Tuesday, April 27 2004 @ 02:38 PM EDT
" He has also served as CFO for several other companies including Talk2
Technology, Inc. and Whittman-Hart."

I used to work for Whittman-Hart which became MarchFirst. They merged with a
company called USWeb CKS (I had never heard of them) Within a YEAR the company
(formarlly Whittman-Hart) was BANKRUPT! I along with dozens of people were
LAYED OFF with a month of the merger! Bert Young and the lot drove the company
into the GROUND! Oh, but the top executives got their golden parachutes - as
usuall in corporations, the people doing the REAL work get screwed!
I guess ol' Burt will help continue SCO's drive into the ground.....

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BayStar, Bert Young, and marchFIRST
Authored by: Anonymous on Tuesday, April 27 2004 @ 02:42 PM EDT
I had a good friend who got a job at a marchFIRST office,
we had both recently left another small mom-n-pop
dot-bomb. I went to visit him a couple times to do lunch,
it was in a very swanky high-rise, they had a few entire
floors of it. Everything with new frosted glass, polished
metal and halogen lights, with the fully-stocked kitchen
and various 90s dot-bomb amenities. For a floor that
could seat about 200 people in cubes, they only had about
30 employees.. and yet they had already bought $1K Aeron
chairs and brand new computers for every unoccupied cube.
The first thing I said to my buddy at lunch was "You know
they're headed for bankruptcy, right?" (based on what I
had seen). He said "Oh hell yeah!" He used his time
wisely, by the time he was finally laid off he was already
making more in freelance work than his salary, and had
built an impressive portfolio of work as well.

[ Reply to This | # ]

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