decoration decoration

When you want to know more...
For layout only
Site Map
About Groklaw
Legal Research
ApplevSamsung p.2
Cast: Lawyers
Comes v. MS
Gordon v MS
IV v. Google
Legal Docs
MS Litigations
News Picks
Novell v. MS
Novell-MS Deal
OOXML Appeals
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v Novell
Sean Daly
Software Patents
Switch to Linux
Unix Books
Your contributions keep Groklaw going.
To donate to Groklaw 2.0:

Groklaw Gear

Click here to send an email to the editor of this weblog.

To read comments to this article, go here
SCO Announces Annual Meeting, Q1 Conference Call/Files 14A
Friday, March 03 2006 @ 02:04 PM EST

SCO has filed a 14A with the SEC, announcing their annual meeting on April 27. And they have also announced the date and time for the first quarter 2006 financial results release and conference call. The results will be released at close of market, and the call will be March 8 at 5 PM Eastern.

Do you remember the litigation in the marchFIRST bankruptcy that we mentioned when Bert Young joined SCO Group in 2004? I have discovered that there was also a shareholder class action, and in February, there was signed a proposed settlement of both the shareholder class action and the trustee actions, which awaits court approval. I'll tell you all about it.

Another interesting tidbit: When SCO announced their new EdgeClick service, the announcement listed the COO of EdgeLink Solutions, Gary Cooper:

One of the first companies to join the Me Inc. Sales Agent program is EdgeLink Solutions. "We've recently created a dedicated part of our business selling Me Inc. digital services from SCO," said Gary Cooper, COO, EdgeLink Solutions. "The leads we're receiving from SCO indicate that customers are interested in extending the capabilities of smart phones to communicate in an entirely new way. We're seeing interest from various customers involved with entertainment, sports teams, universities, and businesses of all kinds."

According to the Utah Department of Commerce Business Entity website for EdgeLink Solutions, Inc., guess who is a Director, Treasurer, and Vice President? One Andrea McBride.

I found the proposed settlement when I noticed some wording in the 14A filing. It lists the backgrounds of SCO's executives. Here what it says about Bert Young:

Bert B. Young has served as Chief Financial Officer since April 2004. Mr. Young is responsible for all finance, accounting, and administration of our worldwide operations. From November 2002 to April 2004, Mr. Young worked as Chief Financial Officer at LANDesk Software Inc. and from September 2000 to November 2002 was the Chief Financial Officer of Talk2 Technology Inc. From March 2000 to September 2000, Mr. Young was the Chief Financial Officer at MarchFIRST Inc. On April 21, 2001, MarchFIRST filed for protection under the federal bankruptcy laws. Mr. Young holds a B.S. degree in Accounting from Utah State University.

I couldn't help but notice that SCO finally tells us that MarchFIRST went bankrupt, something it failed to mention when Young joined SCO. For that matter, when he joined, the SCO press release didn't actually mention marchFIRST at all. Here's how it described his work history then:

"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."

Whittman-Hart became marchFIRST, a connection we demonstrated in that April 2004 article, but SCO didn't mention that detail. It drew my eye that SCO was freely listing the marchFIRST bankruptcy now, so I thought I'd see what, if anything, had happened with that case. Young and other executives had been accused of various breaches of fiduciary duty. Knowing SCOfolk as I do, I figured there was some reason why they felt they could or should mention it now. And sure enough, there is a proposed settlement [PDF] as of February 9 and filed with the court on February 24th for its approval.

If this is all new to you, here is the complaint [PDF] filed by the trustee in the bankruptcy, Andrew Maxwell in February of 2002, accusing the executives of marchFIRST, including Mr. Young, of breaches of fiduciary duty, and here's the Complaint to Avoid Fraudulent Transfers and for Declaratory Judgment [PDF] filed by the same trustee in April of 2003, trying to get the court to declare void settlement agreements between marchFIRST and Young and others when they left the company, which purported to indemnify them. And here's the Answer [PDF] to that one.

It wasn't easy to find the settlement, because it isn't listed on Pacer in either of the two trustee actions yet. But when I read Mr. Young's Answer [PDF] to the first complaint, on page 25 I noticed that there was also a class action shareholder suit brought against marchFIRST and certain officers of the company, Sutton, et al. v. Bernard et al., which asserted violation of federal securities law. That's where I found the proposed settlement.

Here is the proposed Order in the shareholder class action [PDF], attached as Exhibit B to the main settlement document, whereby the shareholders will get $18 million (see page 8). And here's the proposed Order Approving Trustee's Motion to Obtain Approval of the First Amendment to the Settlement Agreement with the D & O Defendants and Certain Other Parties [PDF], which says that around $6 million will go the trustee for the creditors (see page 3) and the D & O defendants can get reimbursement of some legal fees and costs up to $175,000. They do not make any admissions of guilt, of course. This document is the one that tells the whole story of the mediation efforts. From the documents, it appears that the court will hear the matter and approve, or not, on April 6.

For those who can't get enough detail, you might also like to read the Motion to Dismiss [PDF] and the Memorandum in Support [PDF] in the first trustee action, which motion was denied [PDF]. The memorandum in support presents the clearest case on behalf of the defendants that I could find, so if you want the whole picture, there you go. So now we know the rest of the story.

I see from the 14A that Darl McBride got a raise. He was paid $265,000 for his leadership at SCO, and a bonus too, $213,823, in 2005. I enjoyed one detail in the 14A. Here's what SCO Group looks for when considering nominated members for the board:

Minimum Criteria for Board Members. Each candidate to serve on the Board of Directors (a "Candidate") must possess at least the following specific minimum qualifications.
  • Each Candidate shall be prepared to represent the best interests of all of the Company’s stockholders and not just one particular constituency.
  • Each Candidate shall be an individual who has demonstrated integrity and ethics in his/her personal and professional life and has established a record of professional accomplishment in his/her chosen field.
  • No Candidate, or family member (as defined in NASD rules), or affiliate or associate (each as defined in Rule 405 under the Securities Act of 1933, as amended) of a Candidate, shall have any material personal, financial or professional interest in any present or reasonably foreseeable potential competitor of the Company.
  • Each Candidate shall be prepared to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and active participation in, meetings of the Board and the committee(s) of which he or she is a member, and not have other personal or professional commitments that would, in the Nominations Committee’s sole judgment, interfere with or limit his or her ability to do so.

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominations Committee may consider such other factors as it may deem appropriate, which may include, without limitation, judgment, skill, diversity, experience with businesses and organizations of comparable size to the Company, the interplay of a Candidate’s experience with the experience of other directors and the extent to which a Candidate would be a desirable addition to the Board and any committees of the Board.

  View Printable Version

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )