Here is the Affidavit of Joyce Wiley as text, thanks to Groklaw's The Cornishman. It's attached to the Yarro, Mott, Christensen complaint [PDF] in the action they have brought against Canopy group's new management, Terry Peterson, William Mustard, the Noorda Family Trust, Ray and Lewena Noorda, their daughter, Val Noorda Kreidel, and John Does 1 through 10. That last means they believe others are involved, but they don't yet know their names, but intend to plug in their names as they discover who they are. Our copy of the complaint is now complete, if anyone is in a position to transcribe it.
Ms. Wiley's testimony is that she was the Controller for Canopy. She informs us that Mr. Yarro is a fine businessman. But in describing his skills, she paints a picture of a Canopy very involved in the day-to-day business of its portfolio companies. In so doing, while buttressing Yarro's worth to the Canopy company, presumably to justify his bonuses and perks, at the same time I think she makes it easier for IBM to pierce the Canopy veil.
Paragraph 17 seems particularly of interest, and I'd certainly be interested in Canopy's consolidated tax returns, as mentioned in that paragraph. Paragraph 18 is odd, in which Ms. Wiley claims that Mr. Mustard made a distinction between a change in management and a change in control when talking with the insurance company. What they mean in having that paragraph inserted is so far a puzzlement to me, but it clearly means something to the Yarro team, perhaps something as simple as trying to prove that Yarro is still on the Board, one of the aims of his lawsuit, or that Mr. Mustard was not truthful with the insurance company. It's something to watch for, though, as the case progresses.
I also don't understand why she, like all the others who submitted affidavits, inserts prominent mention of the suicide of Mr. Penrose. It seems legally immaterial, although tragic, and gratuitously invasive of the family's private grief. I gather they wish to portray Mr. Mustard as a mean boss, but nothing they describe with specificity seems all that bad, considering that from his standpoint, he viewed the employees as having unjustly enriched themselves at the expense of the company.
But there is a great deal of mystery in this affidavit. What was the document Mr. Mustard allegedly asked the employees to sign that allegedly made them all, including Mr. Penrose, so upset? She does not say. In a conversation, that might not strike me as so peculiar. But in an affidavit, it is inexplicable. With time, we will learn more, I'm sure, but there has to be a reason why the lawyers decided not to be specific. But by far the most interesting paragraph is paragraph 22:
22. After December 17, 2004, and before I resigned from Canopy, various managers at Canopy portfolio companies expressed concern that they are not going to be able to get the funding from Canopy that they were expecting and need to continue with their business plans, or that any funding they receive will not be received by the date the funding was previously promised.
That naturally raises a question in my mind: is SCO one of those companies that was getting funding that is now imperiled? Because of the vagueness of this affidavit, it isn't possible to know, but in time, all the beans will be spilled. That's what happens in lawsuits.
I also can't help but wonder about SCO's Notification of Late Filing with the SEC, which said this: "The Company is examining certain matters related to the issuance of shares of common stock issued under the Company's 2000 Employee Stock Purchase Plan and potentially its other equity compensation plans. More time is needed to compile and analyze all relevant data."
STANLEY J. PRESTON (4119)
MICHAEL R. CARLSTON (0577)
MARALYN M. REGER (8468)
SNOW, CHRISTENSEN & MARTINEAU
Attorneys for Plaintiffs
IN THE FOURTH JUDICIAL DISTRICT COURT
UTAH COUNTY, STATE OF UTAH
RALPH J. YARRO III, an individual,
DARCY G. MOTT, an individual, and
BRENT D. CHRISTENSEN, an individual,
VAL NOORDA KREIDEL, an individual,
TERRY PETERSON, an individual,
WILLIAM MUSTARD, an individual, THE
NOORDA FAMILY TRUST, a Trust,
RAYMOND J. NOORDA, an individual
and a trustee of the Noorda Family Trust,
LEWENA NOORDA, an individual and a
trustee of the Noorda Family Trust, and
JOHN DOES 1 THROUGH 10,
AFFIDAVIT OF JOYCE WILEY
Civil No. 050400205
Honorable Anthony W. Schofield, Div. 8
STATE OF UTAH )
COUNTY OF UTAH )
JOYCE WILEY, being first duly sworn, upon oath, deposes and says:
1. I am over twenty-one years of age and have personal knowledge of the facts stated below.
2. I have been a Certified Public Accountant since 1979.
3. In April 1996, I was hired as the Accounting Manager and was later named
Controller for The Canopy Group, Inc, ("Canopy"). As Controller, my duties included, among
other things, accounting, payroll, financial statements and budgeting. I was also the 401(k)
Administrator, the Cafeteria Plan Administrator, and the Benefits Plan Administrator for Canopy
and certain Canopy portfolio companies. I was also the Corporate Secretary for Canopy. I
maintained the records and documents relating to Canopy's investments in Canopy's portfolio
companies. I also prepared accounting data necessary for the preparation of Canopy's annual
income tax returns. While employed at Canopy, I also handled the accounting for Angel
Partners, a support organization of The Church of Jesus Christ of Latter Day Saints formed with
donations of Novell stock from the Noorda Family Trust.
4. I became acquainted with Raymond J. Noorda ("Mr. Noorda") and Lewena
Noorda ("Mrs. Noorda") when I started working at Canopy in 1996. I enjoyed working with Mr.
Noorda and visiting with him. When Mr. Noorda was working full-time, most days he was at
work before I arrived and was still working at the time I left for the day.
5. I have never heard Mr. or Mrs. Noorda criticize Ralph J. Yarro, III ("Mr. Yarro"),
Canopy's President and Chief Executive Officer, Darcy Mott ("Mr. Mott"), Canopy's Vice
President, Chief Financial Officer and Treasurer, nor Brent Christensen ("Mr. Christensen"),
Canopy's Vice President, Corporate Counsel and Assistant Secretary. In fact, Mrs. Noorda told
me in approximately 2000 that they needed to take care of Mr. Yarro because they needed Mr.
Yarro to run Canopy and they wanted to make certain that Mr. Yarro stayed with Canopy.
6. The last time I saw Mr. Noorda was at the March 2004 Canopy Board of Directors
meeting. At that meeting, Mr. Noorda had difficulty following the documents that were being
discussed. To assist Mr. Noorda, Mr. Yarro patiently explained the background of each
document, including Canopy's budget, not only to Mr. Noorda but to Mrs. Noorda as well. Mr.
Yarro assisted Mr. Noorda in locating the documents as they were being discussed. Mr. Noorda
made few comments during the meeting and after awhile it seemed he was not engaged in the
discussions at hand.
7. I have known Mr. Yarro for approximately nine years. Mr. Yarro has treated me
with respect as an employee of Canopy. Mr. Yarro is a skilled businessman and has provided a
tremendous amount of support and advice to Canopy employees and to the Canopy portfolio
companies. From the time of his appointment as Chief Executive Officer until December 17,
2004, Mr. Yarro directed Canopy in the same manner that Mr. Noorda had in the past.
8. On December 17, 2004, Canopy employees were instructed to report to a
conference room for a meeting.
9. At the meeting on December 17, 2004, William Mustard ("Mr. Mustard"), a man I
had never met, informed Canopy's employees that Mr. Yarro, Mr. Mott and Mr. Christensen
were no longer employees of Canopy as a result of an action of Canopy's Board of Directors, and
that Mr. Mustard was now the President and Chief Executive Officer of Canopy.
10. After the meeting, I tried to do my job and assist Mr. Mustard with the transition.
11. On December 22, 2004, I was told that Mr. Mustard wanted to have a meeting
with all Canopy employees. At that meeting, Mr. Mustard gave each Canopy employee a
document and told us to read and sign it. He hurried us through the process not giving us an
opportunity to re-read it. The document I was given to sign was dated December 17, 2004. Mr.
Mustard then became extremely contentious with Dan Baker ("Mr. Baker"). Apparently, Mr.
Baker had crossed off the date of December 17, 2004 on the document. Mr. Mustard repeatedly
asked Mr. Baker, in an angry voice, whether Mr. Baker had spoken to others about what had
occurred on December 17, 2004. When Mr. Baker tried to answer, Mr. Mustard interrupted him
and repeatedly told him, with a raised voice, that he wanted a "yes" or "no" answer. Mr. Baker
finally replied "no." I found Mr. Mustard's conduct towards Mr. Baker to be rude, intimidating
and threatening. Other employees were also visibly upset by Mr. Mustard's conduct. The
employees did not say anything to Mr. Mustard after that heated exchange. After the meeting, I
cleaned off my desk, as Mr. Mustard had instructed, and left for the Canopy Christmas luncheon.
12. Mr. Mustard did not attend the Canopy Christmas luncheon. At the Canopy
Christmas luncheon, the employees discussed how upset they were with the recent events and by
what had occurred during the meeting with Mr. Mustard. Rob Penrose, in particular, was very
distraught. He kept repeating that he should not have signed the document. We tried to reassure
Rob Penrose that we all knew that each of us had felt coerced into signing the document.
13. After the Christmas luncheon, Canopy's offices were scheduled to be closed until
January 3, 2005.
14. Two days after the Christmas luncheon, I was told that Rob Penrose had
committed suicide. I was very upset by this news.
15. On Monday, January 3, 2005, the first day Canopy's offices were open after the
Christmas break, Mr. Mustard did not speak to Canopy's employees about the death of Rob
16. Mr. Mustard continued to treat me and other Canopy employees in a hostile
manner. On one occasion, we exchanged pleasant good morning greetings. Then just a few
minutes later, he came into my office and talked to me in a stern and demeaning manner about an
issue that had been discussed and resolved previously. It was at this time that I made my
decision to resign.
17. I noticed that Mr. Mustard was slow to take action on issues I brought before him,
but yet very quick to criticize and condemn without adequate reasons or knowledge. For
example, Mr. Mustard criticized Mr. Yarro, Mr. Mott and Mr. Christensen and the methods he
claimed they used for making decisions regarding the portfolio companies. Mr. Mustard made
comments asserting that Mr. Yarro, Mr. Mott and Mr. Christensen did not review or have access
to important financial information, such as financial statements and budgets, when Mr. Yarro,
Mr. Mott and Mr. Christensen made decisions regarding the portfolio companies. In a meeting,
Mr. Mustard challenged those present at the meeting to disagree with his assertion, promising
that he would follow up with a supplemental question if anyone indicated their disagreement. I
was too intimidated by Mr. Mustard to state my disagreement to him, even though I knew that
what he had said about Mr. Yarro, Mr. Mott and Mr. Christensen was untrue. In fact, I knew that
Mr. Yarro, Mr. Mott and Mr. Christensen met regularly with the portfolio companies, reviewed
financial information regarding the portfolio companies, served on the boards of some of the
portfolio companies, and were informed about the financial status and financial needs of the
portfolio companies. This has always been the case. Mr. Yarro, Mr. Mott and Mr. Christensen
also reviewed the financial information of the portfolio companies when they re-evaluated
Canopy's investment for tax planning purposes, as many of the portfolio companies have been or
are at this time part of Canopy's consolidated tax return.
18. Mr. Mustard's hostility and management style is also illustrated by his conduct in
response to an inquiry by an insurance broker. The insurance broker for Canopy's Directors &
Officers Policy ("D&O Policy") contacted me and asked me about the purported changes in
management so that he could determine whether the changes in management affected the
insurance policy coverage. Consistent with instructions provided by Mr. Mustard that all Canopy
employees should refer any questions about Canopy's management to him, I told the insurance
broker he should speak with Mr. Mustard about the matter. I also left a message with Mr.
Mustard's assistant that the insurance broker would like to speak with Mr. Mustard. Mr.
Mustard later came down to my office and repeatedly questioned me, in a stern and accusing
manner, as to how the insurance broker would attribute a change in management to a change in
control. Mr. Mustard acted as if he suspected that I had told the insurance broker more than just
what was reported in the newspapers regarding the change in management. Mr. Mustard kept
hammering me with the statement that he needed to understand why the broker would think that
a change in management might mean a change in control. I offered a few likely explanations that
Mr. Mustard refused to accept. Mr. Mustard told me he would not return the broker's call and
that it was unnecessary to do so because there had not been a change in control of the company.
The broker was persistent with emails and phone calls, and finally a few days later, Mr. Mustard
spoke to the insurance broker and told him that Canopy's D&O Policy should still be effective
because, although there may have been a change in Canopy's management, there had not been a
change in control of Canopy. Mr. Mustard's statement to the insurance broker gave me concern
about Canopy's D&O coverage, as well as Canopy portfolio companies' D&O coverage under
the same policy.
19. The working conditions at Canopy after December 17, 2004, were intolerable. I
resigned my employment with Canopy on January 19, 2005.
20. I have not obtained other employment. To my knowledge, Canopy has not hired
someone to fill my position. If Mr. Yarro, Mr. Mott and Mr. Christensen are permitted to
continue as officers of Canopy, I would like to resume my employment with Canopy.
21. I am concerned that my resignation from Canopy will adversely affect Canopy,
Canopy portfolio companies, and Angel Partners. The financial statements for 2004 need to be
finalized for Canopy, Canopy Properties, and Angel Partners. In connection with closing
Canopy's books for 2004, there are accounting entries that must be prepared and documentation
that must be gathered to complete the process. Also, just before I resigned, Canopy received an
amnesty tax letter from the State of California, that I forwarded to Canopy's tax accountants. I
think there are tax decisions with respect to the State of California that may be helpful in limiting
or eliminating Canopy's tax liability. However, I was unable to speak to Canopy's tax
accountants about the previous tax decisions before I resigned. There is also 401(k) Plan
compliance testing due in February, and although I have completed much of the data and left a
description of what needs to be completed, no one currently with Canopy has the necessary
knowledge to complete the task. The compliance testing is necessary for the filing of the
annual 5500 that is required by the Department of Labor along with the annual audit. Failure to
properly complete the compliance testing could result in, among other things, disqualification of
the 401(k) plan that the Canopy and Canopy portfolio companies participate in, the distribution of
assets to the participants for which taxes will be owed, and fines and penalties to Canopy.
Additionally, if "exceptions" are discovered in the compliance testing it may result in remedies
that must be executed by the Plan before April 15, 2005. Also, Canopy's personal property taxes
are due in February. No one currently with Canopy has the knowledge to properly make the
calculations and ensure proper filing and payment. Finally, Canopy portfolio companies rely on
me to provide them with certain financial information.
22. After December 17, 2004, and before I resigned from Canopy, various managers
at Canopy portfolio companies expressed concern that they are not going to be able to get the
funding from Canopy that they were expecting and need to continue with their business plans, or
that any funding they receive will not be received by the date the funding was previously
23. I have exercised my options for Class A Voting stocks in Canopy, to the extent
they have vested. To my knowledge there have been no Canopy shareholders meetings or
shareholders consent resolutions since February 2004. I am not aware of any Canopy
shareholders meetings set to be held in 2005.
SUBSCRIBED AND SWORN TO before me this 26 day of January, 2005
Residing in David County
My Commission Expires:
18 February 2008