The weeks pass but the opacity in the TransPerfect case lasts. The records and details of the conflict are still blocked by Judge André Bouchard. Meanwhile, the associations of citizens of Delaware redouble their pressure to see what the judge ordered to spend 250 million dollars in one of the most controversial shareholder conflicts in the history of the United States. The collateral effects of the dispute have also been noticed in Spain. During the conflict, the 4,000 jobs generated by the company throughout the world have been put at risk, of which 500 are located in Barcelona.
Grouped around the Citizens for a Pro-Business Delaware association ,citizens disapprove of Bouchard’s attitude, which, in addition to damaging the image of the State, goes against the current US legislative framework, which obliges the public to publish detailed information on resolved cases. A maneuver that demonstrates a clear intention to hide the records and invoices with the aim of covering up all the law firms and consultants that have profited from this conflict.
Pressure on the Delaware court system
The favorable resolution of the TransPerfect case, with the purchase of Phil Shawe from the remaining 50% of the company, making it possible to secure employment and maintain the growth path, has not calmed the mood in Delaware.
Resolved the case of the multinational translation, the case now focuses on the neutrality of the judicial system of Delaware, which is in question. This American state has fallen from the first to the eleventh position in the neutrality ranking of the country’s judicial systems, according to a survey prepared by the United States Chamber of Commerce. As a result, some companies – including TransPerfect – have moved their headquarters to other states in search of a more neutral and competitive system.
Business leakage
The Delaware citizens’ associations believe that this fall in Delaware’s neutrality and competitiveness is holding other companies from establishing their headquarters in the State and involves the flight of companies to other, more competitive places. Something that poses a high risk for employment and directly impacts the generation of new jobs.
Now, the goal of these associations is to highlight the irregularities that have been in the TransPerfect case by the State Chancellery and prevent a repeat case like this, in which a judge decrees the forced sale of a company private multinational with benefits and approves the expenditure of 250 million dollars in law firms and related consultants.
Law firms involved in controversy
One of the firms that have profited the most in the TransPerfect conflict, with the consent of Judge André Bouchard, has been the Skadden Arps law firm. One of its partners, Robert Pincus, was appointed as judicial administrator of the company during the conflict precisely by Bouchard. According to data from the Citizens for a Pro-Business Delaware platform, Pincus would have received a salary of 1,425 dollars per hour to supervise the controversial forced sale of the company and would have presented invoices without details or breakdown, according to sources close to TransPerfect. Invoices that remain hidden today by the judge’s decision.
But the controversies that surround the firm do not end with the TransPerfect case and go further. In January of this year, the firm Skadden Arps agreed to pay a sanction of 4.6 million dollars (4.1 million euros) to resolve its responsibility with the Department of Justice of the United States for violating the Agent Registration Act. Foreigners (FARA) in political lobbying work done with Trump campaign advisor Paul Manafort to benefit the Government of Ukraine in 2012 and 2013 in favor of Yanukovych.
In this context, from Citizens for a Pro-Business Delaware demand to investigate the work commissioned by Bouchard to companies such as Skadden Arps, which have endangered thousands of jobs by targeting the division and sale of the company to funds vulture.
The latest on the TransPerfect Global case is that the employees of the company apparently have no choice but to go on offense, because the injustice and corruption are so over-the-top that the company itself is powerless to take legal action, because it knows it will see no justice from Andre Bouchard, Leo Strine and their Good Ole Boys Club known as the Chancery Court in Delaware. Understand folks, the problems here are dark and deep. The employees feel that the Chancellor has been and is continuing to steal from them. So much so, they have resorted to taking up the mantle for their own company because the money going to Bouchard’s friends at Skadden Arps is costing them their benefits and costing them their raises! Their lives and livelihoods are at stake as the Chancery Court’s approved looting has forced them to galvanize to battle this perceived corruption. All that money is going to Skadden Arps. Andre Bouchard, Chief Chancellor of the Delaware Chancery Court, is ordering it and there is nothing anyone can do to stop it. In fact, I’ve been told by contacts from within the company that these bills have been approved by Bouchard in 15 minutes or less! You’re hearing this right folks, the Chancery Court isn’t even looking over the very bills that they are ordering TransPerfect to pay. Given the intimate relationship between Skadden and Chancery, you would think they would handle them with extra care, instead they rubber stamp them! Egregiously, this is all happening under court seal and Bouchard continues to hide it from public view! It has to stop! Our state legislators need to take action. Now the employees — who in my opinion are really the ones being robbed — are so rightfully disgusted by the Court’s action that they are mounting a challenge to see these bills. Employees are demanding complete transparency from Bouchard’s Court and a release of all the documents, which is the law. These bills should be open to the public, by statue! Please read the detailed article below. The Chancery Court irregularities are so brazen that the employees are rising up against Bouchard’s shady court system. I again implore our legislators to no longer sit idly by as the largest heist in American court history continues unabated.Apr 11, 2019
WILMINGTON, Del., April 11, 2019 /PRNewswire/ –18 months after the historic TransPerfect case was settled, the custodian in the case, Robert Pincus, has continued to bill TransPerfect every month for undisclosed services, including what his own $1,475 an hour role entails. His responsibility remains unclear, and any efforts to ascertain his work on behalf of TransPerfect has been met with silence. The Chancery Court has kept all invoices and description of services under seal – allegedly to protect the sale process, which ended in late 2017. The custodian’s spending is a matter of public record and public concern and employees deserve answers. Skadden, Arps, Slate, Meagher and Flom has received a sizable amount of the 250 million that was spent on the case. Chief Justice Andre Bouchard previously worked at Skadden before joining the Chancery Court in 2015.
“Why these records are still under seal is a perpetual mystery for our members. Pincus and his company has spent over $1M on secret services since the company changed ownership and the case ended,” said Chris Coffey, Campaign Manager for Citizens for Pro-Business Delaware. “This means fewer resources for TransPerfect employees in the form of income and benefits. To have those records under seal is arbitrary and capricious and you can only get away with that kind of rubber stamping in the secretive boys’ club that is the Chancery Court and its network of cronies. We need transparency at long last.”
CPBD will begin an ad campaign this Spring to highlight efforts to get to the bottom of this secret spending. The efforts may also include a push for legislation to increase transparency at the Chancery Court in cases similar to this one. Indeed, TransPerfect has continued to set records for growth despite the factual inaccuracies spread by the Court about the health of the company. The campaign will include digital ads, billboards, polling, and the hiring of a lobbyist. David Walsh has been engaged in the work.
About Citizens for a Pro-Business Delaware
Citizens for a Pro-Business Delaware is a group made up of more than 2,700 members including employees of the global translation services company TransPerfect, as well as concerned Delaware residents, business executives and others. They formed in April of 2016 to focus on raising awareness with Delaware residents, elected officials, and other stakeholders about the issue.
While their primary goal of saving the company has been accomplished, they continue their efforts to defend the TransPerfect employees and fight for more openness in the Delaware Chancery Court. For more information on Citizens for a Pro-Business Delaware or to join the cause, visit DelawareForBusiness.org.
“Delaware’s Chancery Once Again Makes a Bizarre Decision that Will Hurt Business” — That’s an actual headline in the Israeli newspaper one week ago. Read the article below. How long is Delaware going to allow the detrimental pattern of behavior by Chancellor Andre Bouchard to continue? In my view, the man’s appearance of corruption has tarnished our once great Chancery Court, and thus, our state’s once great reputation for being a fair and equitable home to businesses. The man is an international embarrassment, and no one would be telling Delawareans what these foreign journalists are writing about Chancellor Bouchard, if it were not for me. I believe the man is a menace ! When will Delawareans have had enough of Bouchard’s antics and demand change from our elected officials? How can this be good for Delaware? We must investigate Bouchard and his cronies and have them account for every cent of where TransPerfect’s $250 million went. Employees at the company are in the dark as to where all the money went? All they know is that the Chancellor somehow drives a Rolls Royce Bentley, while they go another year sacrificing raise money and benefits. We need to unseal the bills that Bouchard is illegally ordering to stay sealed to protect his former firm Skadden Arps — the Chancellor’s state-sponsored TransPerfect cover-up continues, and our state’s once-coveted image and national ranking plummets into the abyss. To my Democratic readers excited about the prospect of Joe Biden running, you can bet your bottom dollar that if Delaware continues to turn a blind eye to Bouchard’s corruption in the TransPerfect case, it will blow up in Democrat faces during the election. Encourage your elected leaders to investigate and follow the money trail, and as always, please share your thoughts.By Charlie Taylor
APR 2, 2019, 11:56 PM
When I first followed the happenings in Delaware as it pertains to how its incorporation business is run, I took issue with the Chancery court’s odd set of decisions in the corporate breakup of TransPerfect, an international translation firm with 75 employees in its Tel Aviv office. Now, after following this court system more carefully, I take issue once again with the recent decision by its Chancellor Andre G. Bouchard in the case of Charles Almond as Trustee for the Almond Family2001 Trust v. Glenhill Advisors – a case that challenges the merger of Design Within Reach and office chair maker Herman Miller. What I wish to convey here is that new businesses – Israeli startups – should not put their corporate eggs into Delaware’s Chancery Court basket, and maybe look elsewhere to incorporate – like Nevada, for example. The court’s decisions puts investors at risk, and without investors startups may have a hard time growing.
Here the Delaware Court of Chancery has constricted shareholder value within Delaware corporate entities and is once again making questionable legal decisions.
Let’s back up – From 2014-2018, I followed closely the TransPerfect case – a case in which co-founders Philip Shawe and Elizabeth Elting fought over control of their then-$500 million business (the company generated over $700 in revenues million since Shawe was awarded full control of his company in 2018). In this case, Chancery Court Chancellor Andre Bouchard ordered a profitable, fully functioning, successful company be put up for auction and sold to the highest bidder as if it were in default or facing bankruptcy.
The TransPerfect case was the first time a Delaware judge had ordered the forced sale of a successful company, and the case was a bizarre exercise in highly subjective application of law. That Shawe was the only viable bidder in the end should have proven to the court and watching public how wrong it was on the various decisions leading up to that correct ending.
Now to the present – As more and more technology companies file for IPOs, executives are using dual-class share structure to maintain control over their companies. What this means is some common stocks come with one vote-per-share while another class of shares comes with many more votes-per-share. Most recently, ride sharing company Lyft went public with this sort of structure in place. This dual-class share structure ensures that company boards and executives maintain their voting power and control over the company, despite what shareholders want.
Before now, the thought of a board running over the vote of the shareholders was unimaginable. However, following the outcome of the Glenhill case, in which the Delaware Court of Chancery exercised its powers under Section 205 of the Delaware Corporation Law (DGCL) to fundamentally and retroactively rewrite a provision of the corporate charter of Design Within Reach that was plain, unambiguous and contained no mistakes, we must acknowledge that it is a possibility. When I commented on the Chancery’s actions in the previous case mentioned, I wrote, “That only perpetuates the fear that the Delaware courts are not really looking out for the shareholders.” I think this does the same, if not more.
Why does this matter?
Chancellor Bouchard’s decision in Almond v. Glenhill opens the door for other Delaware corporations to retroactively make changes to corporate charters based on the whims or desires of the current power bases and stakeholders which can usurp the values or rights of other investors who bought in under a set of rules they knew about.
According to Scott Watnik, of Wilk Auslander, the attorney representing plaintiff Charles Almond in the Glenhill case, “this is a risk that any investor in any Delaware corporation must now consider. Simply speaking, this decision gives corporations the opportunity for a ‘do over’ when they make mistakes and don’t like the outcome. Investors should be very concerned about this, as it means the corporate documents they rely on are no longer iron-clad for Delaware companies.”
Let’s Connect It All – In the case of Lyft and other technology companies filing for IPO’s with this dual-class share structure, Watnik says “if founders want to create a new class of stock with super voting rights just for themselves, and the shareholders vote against it, under the July 2018 amendments to DGCL 204(h)(1), it’s now possible for corporate boards to: (1) issue the stock to the founders anyway, and (2) pass a resolution under Section 204 ratifying the creation of the new class of stock on the ground that the creation of that stock was a ‘defective corporate act’ – and the nature of the ‘defect’ is that the shareholders did not vote for it.”
If shareholders want to file an objection, it must be done so within 120 days – and that’s assuming they are told of the approval in that time frame since notice only needs to be given to brokers, not the shareholders. But even if shareholders objected with the 120 days, they would be forced to enter into a litigation in the Chancery Court under Section 205 as to the “validity” of the board’s ratification.
The TransPerfect and Glenhill cases are recent examples of how the Delaware Chancery Court has been making some head-scratching legal decisions that could further upset Delaware’s business climate, which is already slipping.
In the case of TransPerfect, the company moved its state of incorporation from Delaware to Nevada, with TransPerfect shareholder Shirley Shawestating, “The expense burden some jurisdictions place on resident companies through overly-high litigation costs is simply staggering. Our situation in Delaware was a perfect example; and without significant legislative reform, I would not be surprised if TransPerfect’s ‘Dexit’ becomes part of a larger trend.”
In the case of Charles Almond as Trustee for the Almond Family 2001Trust v. Glenhill Advisors, the results remain to be seen, as it is still pending an appeal, but one thing is certain – this is a case that will have a lasting impact on DGCL 204/205, and entrepreneurs looking to incorporate, will likely begin to look away from Delaware.
ABOUT THE AUTHOR
Formerly from Israel, now in Delaware, I have owned, run and worked with food, technology and politics, beginning with the MFA and several Knesset members.