It is upsetting for me to watch what I view as one of America’s greatest business success stories, TransPerfect Global, a Delaware corporation, crumble under the Chancery Court’s apparent improprieties, which have made this once esteemed institution now appear suspect. It is truly inequitable as the actions by this court have filled the pockets of Skadden Arps and the court’s other “consultant” friends, while TransPerfect employees lose raises and bonuses, as this great company suffers. Chancellor Bouchard, I hope you and your cohorts enjoy all the money you seem to be plundering from this 25-year-old company… started in a NYU dorm room and now being picked apart by a careless custodian all with your approval. Know that when you try to fall asleep at night, is it not only the TransPerfect employees’ lives you are destroying, but Delaware’s business reputation, Delaware’s jobs, and in turn, Delaware’s economy. I’m shaking my head as I write this. What you have done is grotesque by any reasonable legal, business standards.
Please see below… the resignation letter of the company’s CTO, Mark Hagerty. He cites Custodian Robert Pincus’ corruption, and how Pincus forced him to make a pirated copy of the Wordfast software (see my last article). The letter reported by Doug Rainey on “Delaware Business Now”, appears in full below. According to the CTO’s affidavit and testimony, from what I can see, Elting’s allegations and Bouchard’s conclusions are completely false. Also, it looks like this guy is clearly a heavy-hitter in the technology world, having worked for Larry Ellison at Oracle, and the founders of Abode as well. Read his letter and feel his frustration, and his venom towards this court-corruption. It leaps out at you. With what’s happening to TransPerfect and now Wordfast (which was not even a part of the trial!), it is a joke to think Amazon or any other technology company would want to incorporate in Delaware, much less put their second headquarters in our great state! Thank you, Chancellor Andre Bouchard. What you are doing is truly despicable.
The company is currently in a sales “auction” process, run by Custodian Pincus. From my perspective, folks the whole thing looks like a rigged money-making machine for Credit Suisse, Alvarez and Marsal, Skadden Arps and other “consultants” who are friends of the court — and their “other client” HIG (who owns TransPerfect’s #1 competitor, Lionbridge)?
For proof of conflict and impropriety, see this quote: “Robert Pincus, an attorney appointed by the Delaware Court to sell TransPerfect, said “business remains ‘very strong’ and the 4,000-employee firm has ‘a deep bench of talent’.” But he then added, “that more executive departures might loom, which could make TransPerfect less attractive to a potential buyer and drive down its sale price.” – Crains New York Business Magazine.
What receiver or custodian or seller of any business, in their proper mind, would make these kind of comments to the press?
By his own astonishing admission, Pincus looks to be violating the courts (ill-conceived) mandate and stating that his own idea of running an expensive auction will not “maximize shareholder value”… so why is he doing it then?? To maximize his own value??
You have heard me try to fight through my articles, what I view as clear, judicial corruption within the State of Delaware from the outside as an educated and informed observer for over a year, but now I urge my readers to please read carefully the letter below and see how it feels from the inside, when it affects someone’s job and his family! Scary and heart-breaking. I again call upon our elected officials to make changes in the law that will prevent future arbitrary and capricious actions by arrogant and rogue judges who think they can legislate from the bench.
RESIGNATION LETTER OF FORMER TRANSPERFECT CTO, MARK HAGERTY
Dear Mr. Pincus,
By this letter, I officially tender my resignation as Chief Technology Officer of TransPerfect, effective immediately.
I am submitting this letter to you because it is my understanding that you are for all intents and purposes in control of the company. As the Delaware Court of Chancery appointed Custodian for TransPerfect Global, Inc. for over two years now, you have been, and continue to be, in a unique position of power over the employees at TransPerfect. You control the future of the company by virtue of the power the Court has bestowed upon you and your ability to vote on company issues as a member of the Board of Directors. While my tenure at TransPerfect has come to an end, it is my sincere hope that by stating the reasons for my resignation in this letter you will consider the impact your decisions have on employees of TransPerfect and ultimately on the value of the enterprise itself.
What I have witnessed firsthand during these past two years is that you do not value, and do not care about, the employees of TransPerfect. I thought you were supposed to be a neutral third party appointed to the board of directors to make decisions that were in the best interests of TransPerfect during this ongoing court ordered process. I thought that being a Custodian for TransPerfect meant caring about its employees, who are the ones that have made it into the success it is today, and who are the lifeblood of the company. Without the tireless dedication of the employees, TransPerfect would not be what it is today, and they all deserve to be treated with respect and motivated to continue to grow the company.
I know how important the employees are, and how much they have contributed to the growth of TransPerfect because I have been a loyal employee for over 14 years, witnessing it firsthand. When I joined TransPerfect the company had no technology at all, it licensed Trados and SDLX and products from competitors. TransPerfect was unable to even get to the table for large enterprise sales deals that involved technology because they had none, zero technology.
Starting with GlobalLink Content Director (which I personally coded and supported and extended for clients like Avis and Dollar/Thrifty), I created the architecture of TransPerfect’s technology products and have hired, trained, mentored, and led an incredible technology team that is now the industry leader. I created the initial GlobalLink Project Director product with a small development team for the Yahoo/FIFA World Cup in 2006. In addition to currently being the technology leader in the space with major enterprise customers like HPE and Dell/EMC, GlobalLink Project Director is now the cornerstone of the entire TransPerfect production operation, translating billions of words per year for our clients, improving gross margins for our internal production centers, reducing employee turnover and improving the quality of life for our project managers by eliminating manual tasks and increasing efficiencies. I am responsible for GlobalLink OneLink, our website translation proxy product, brought to market in just one year by creating the architecture and code for the first version with a talented senior software developer who I recruited and convinced to join the company because I knew he could deliver.
The list goes on, but you should already know about all of our great technology products, created during my 14 years as CTO, during your preparation to sell the company. So far in 2017 our GlobalLink branded technology products, which I am responsible for creating and evolving over the past 14 years, are directly responsible for roughly 35% of TransPerfect revenue, and even for customers that do not license our technology, our internal production teams at TransPerfect use GlobalLink Project Director and the suite of products for over 90% of all translation jobs that the company delivers. In the last 6 years, one such product, GlobalLink OneLink, alone has brought in $31 Million dollars in technology licensing revenue, and over $107 Million dollars in total revenue including services, while GlobalLink Project Director has brought in $40 Million dollars in technology licensing revenue and over $311 Million dollars in total revenue including services. That is well over $400 Million in revenue directly related to these two GlobalLink products in just the last 6 years. Our year over year growth for technology and services through three quarters from 2016 to 2017 is over 40%.
Clearly as CTO who is responsible for these technologies, one would think I would be congratulated and rewarded for this kind of success. Then I look at my paycheck and my compensation has not changed in 2 years. I make the same salary today that I was making in 2015. Mr. Pincus, you are on the board of directors, the board controls my compensation. You are responsible for this unfair treatment of me. Have you been able to force TransPerfect to pay you whatever you want, increase your hourly rate, and hire as many other Skadden lawyers to enrich your firm and your pockets? Is it really fair and just that Skadden makes millions of dollars annually from TransPerfect, and I don’t get a raise for two years when I am responsible for generating 35% of the revenue and profits that are used to pay you and your firm and the firms you hire to assist you?
Money, Greed, Power, Arrogance: these things corrupt people, have they corrupted you?
I have dedicated the last 14 years of my life to TransPerfect. I am directly responsible for hundreds of millions of dollars in revenue. I am responsible for millions upon millions of dollars in profits over the years that went directly to Liz Elting and Phil Shawe as shareholders. By creating the technology platform that increased the value of TransPerfect by hundreds of millions of dollars, I have delivered in my role as CTO. Who is going to profit from all of my hard work besides the owners of TransPerfect? Robert Pincus will profit. Skadden, Arps, Slate, Meagher & Flom will profit. Credit Suisse will profit. Joel Mostrom will profit. Alvarez and Marsal will profit. EY will profit. Every firm you hire to assist you will profit. But there is no recognition of my contributions to the value of the company, and there is no upside for me.
In fact, the only possible upside for the TransPerfect success that I, Mark Hagerty, ever had was Phantom Stock. The Phantom Stock program was created at my urging to Phil Shawe for the company to give some upside to employees as the company grew, since as a private company there was no opportunity for real equity for employees. There was always the hope that as the company grew and continued to be profitable the Phantom stock would be worth something significant. In fact the Phantom Stock price had been increasing every quarter, every year, along with the company success.
But then, it began to decline after you became Custodian. How is that possible? Company revenues have continued to increase every quarter, one would expect the Phantom Stock price would go up too.
But there was always a profit component to the formula for Phantom stock, and the millions of dollars in money spent by yourself as Custodian on Skadden and Alvarez and Marsal and others you hired, devalued the Phantom Stock, driving the price down even as the company grew.
I wonder, when you and your investment bankers calculate EBITDA for TransPerfect for the sale, I bet you exclude all of these legal costs and other millions of dollars of costs from that calculation, right? You probably say it is a one-time extraordinary expense that will not exist after the sale, so you exclude that from the calculations, right? That helps you sell the company at a higher valuation, right?
But, for the Phantom Stock calculation, did you apply that same reasoning? No. Did you care about the value of the Phantom Stock to the employees? No. When I cashed in my Phantom Stock, the payout was far less than expected because of this. I lost a lot of real money as my Phantom Stock declined in value, the only possible upside in the company that I ever had, as a direct result of you and your law firm billing TransPerfect for millions of dollars in fees. You had the power to amend the Phantom Stock plan to keep your extraordinary fees from depriving TransPerfect employees of the true value of their labor. But you didn’t. How is that fair to me? How is that fair to the other TransPerfect employees that actually contributed to the incredible growth in the value of TransPerfect as a company?
On the topic of being fair to employees, I have attached an email I sent you back in February of 2016 regarding employee health benefits. TransPerfect CUT employee health benefits in 2016 compared to what they were in 2015. You had a choice, you could have done the morally right thing and kept benefits the same, you had the power. You could have shown that you do care about the TransPerfect employees. It was a tiny amount of money, nothing compared to what you make annually and the millions of TransPerfect dollars that goes to your Skadden law firm and the firms and consultants you hire. But you chose to cut employee benefits because that meant spending a few TransPerfect dollars on actual TransPerfect employees. If you are so convinced cutting employee benefits is a good decision, have recommended to your own Skadden law firm that they should cut employee benefits too?
Shortly after you became Custodian, on Dec 1, 2015, I emailed you directly about another employee related issue. I asked you to please resolve the Yu-Kai Ng employee situation, regarding the unfair treatment regarding his pay. As Custodian you had the power to do the right thing and solve that issue quickly and easily with very little cost to TransPerfect. Instead you chose to spend TransPerfect money. You hired an investigator to write a report (how much did that cost?) that was, in my opinion, completely flawed. The investigation was flawed because the investigator never bothered to speak with me, Mr. Ng’s immediate supervisor, at all during the investigation. Wouldn’t any competent investigator seeking the truth have at least taken an hour of his time to interview Yu-Kai’s boss and get clarification on the situation. By not resolving the issue, you forced Yu-Kai to sue TransPerfect, causing him unnecessary stress and duress by having to sue his employer to receive his proper back pay and future pay. No employee wants to have to go through the hassle of hiring an employment lawyer and suing his own employer. You forced a situation that went on for many months and required mediation to settle. How much TransPerfect money did you waste to settle that case when you could have solved it by paying him fairly what he was due and spending nothing extra? How much money did Skadden and other firms you hired bill TransPerfect related to settling the Yu-Kai lawsuit? If you had just been unbiased and fair and focused on your duties as Custodian, TransPerfect would have saved a lot of money. I would venture to guess that the total money spent on lawyers and investigators exceeded what Yu-Kai was owed. Who profited from that? Not Yu-Kai. Not TransPerfect. Only lawyers and investigators. How many other employee related lawsuits have you directly caused by your decisions on
the board?Continuing on the topic of how you choose to treat TransPerfect employees, and how you do not value their contributions to the company, I received an email from Carol Chuang in HR on September 5th where I was informed Keith Brazil’s title promotion to Senior Vice President was rescinded. I had subsequent follow up with her and her response on September 14th where she says the board “specifically also discussed his promotion and voted to rescind it.” As the controlling vote on the Board of Directors, that means you had the power to decide on this issue. This is such a petty issue, has no bearing on the sale of the company whatsoever, and the only goal of voting to take away a deserved title promotion from Keith Brazil is to send a clear message that the Board does not care about the employees. It is clear from the email thread that Keith was promoted before any new rules were put in place regarding titles. Also, the Board did not even bother to ask me, his manager, to actually give the reasons for his promotion, which would have clearly illustrated why he clearly deserved it. The bottom line is you decided to embarrass a critical technology employee, someone who has been with the company even longer than me and who has had a huge impact on the success of our technology.
There is no valid reason for you voting to strip his title, but the message was clear to this and other hardworking employees: you are in charge and they don’t matter at all. We are talking about a title, not money. If you sent out a poll to all of the employees in the company and asked them if Keith deserved to be promoted to Senior Vice President, I am certain the vote would be overwhelming in favor of his new title. Everyone on his team, everyone in Sales, everyone in Production would agree he deserves it.
But somehow, the all powerful Mr. Pincus gets to decide and chooses to rescind his title instead of affirming it. What effort did you even take to find out if he deserved it? I know the answer, since you never asked me about it …. None. I believe you are aware that the social security numbers, home addresses and annual salary information of TransPerfect employees were handed over to criminals who specialize in identity theft.
As a result, I and every other TransPerfect employee have to lose sleep worrying about someone possibly stealing our identity, filing false tax returns on our behalf, or raiding our social security benefits in the future. I personally had my IRS refund delayed for 4 months because I had to schedule an in person meeting to prove my identity before I could get my refund. These are hassles and stresses I don’t enjoy that I have to worry about forever, for the rest of my life, just like every other U.S. TransPerfect employee. Why? It is my understanding that after your hand-picked head of Accounting, Joel Mostrom of Alvarez and Marsal took over the department, someone under him responded to an obvious phishing scheme and sent out all of the company W-2s with employee names, addresses, and social security numbers to someone that specializes in identity theft. That person must have been untrained for the job they were doing, because anyone with any knowledge of privacy laws and anyone that understands anything about keeping social security numbers confidential would never have replied to that email even if it came from Liz Elting herself rather than an impersonator. There is no reason to ever send all of the Social Security numbers of the employees to Liz Elting or anyone that might ask for them. If a CEO or Board member asks for employee compensation information, that can be supplied without giving out the actual W-2s and comprising employee social security numbers. By hiring Mr. Mostrom, by extension you caused this breach that impacts me and every TransPerfect U.S. employee now every day for the rest of our lives.
Throughout this sale process over the last two years, I have continued to keep my head down, tried to ignore the noise and just do my job. By any fair evaluation, I have done an exceptional job, improving our technology products, increasing our reputation as the leader in technology in the translation space, increasing our customer base, and growing our revenues with remarkable growth over the last 2 years. During 2017 I have been asked to provide lots of information and I have done everything asked of me. You hired EY to prepare a report on the company to give to prospective buyers. I provided information to EY whenever they asked for it, spending considerable time to give them very detailed spreadsheets and information. I met in person with EY when they asked for it and answered all of their questions. I fully cooperated with them. The same goes for Joel Mostrom every time he asked me for information. I participated in phone calls with Joel, and even with you, whenever I was asked. I answered every question asked of me. The same goes for Adam Mimeles, TransPerfect’s corporate attorney, whenever he asked for anything related to due diligence for the sale, I have provided it, in detail.
The only time I hesitated for even one minute was when James Pak of Skadden asked me about Wordfast source code. On Wednesday, August 9th, James sent me an email asking for a conference call. I immediately replied that I could do it the following day, Thursday, August 10th and asked him what he wanted to talk about, so that I could be prepared. When he replied that it was about Wordfast source code, I was very concerned. I had provided Wordfast employee, cost, and product information to EY for their technology report. When they finalized their report, they had removed Wordfast as a category. I was told that was because Wordfast was not part of the sale. I later had a call with you and Joel Mostrom where you asked me what other CAT tools TransPerfect owned (I mentioned Alchemy Catalyst) and what it would take to replace Wordfast after the sale. These interactions made it clear to me that Wordfast was not owned by TransPerfect and not included in the sale. That was made clear to me by you, EY, and Joel.
When Mr. Pak asked me to discuss Wordfast source code, I reasonably felt very uneasy because I did not want to be exposed to liability for discussing third party proprietary information, such as source code, related to Wordfast. On Thursday I told Mr. Pak I couldn’t do the phone call until this issue was resolved. It then took until the end of the day on Friday, August 11th before I received a letter from you, Mr. Pincus, granting me indemnity related to Wordfast. Over the weekend and on Monday I was on a scheduled vacation in Maine with my family hiking, and Tuesday I was driving back to Boston from Maine and flying back from Boston to San Jose, CA so that I could be back in the office on Wednesday. I had an out-of-office message indicating that I could be reached on my cell phone in the case of an emergency. When I returned to the office I immediately emailed Mr. Pak and set up a call with him that morning. I spoke with him and answered all of his questions and educated him about our products and the source code. It was only after I had spoken to Mr. Pak that I saw the letters Skadden had sent to my attorney threatening Board action against me. I was actually shocked by that when I found out, but then I realized it was in line with the standard bullying and intimidation tactics that you and your Skadden firm use in dealing with TransPerfect employees. I immediately called up Mr. Pak and asked him to apologize to me personally, as I had been fully corporative and my vacation was planned months in advance. I pointed out to him that he could have just called my cell phone on Monday if it really was so urgent, and such an emergency that it caused Skadden to threaten my job for being on vacation for 2 days. He said my cell phone was not in my out-of-office message so he couldn’t call me. I never put my cell number in my OOO messages because that message goes to every person that emails me, and I don’t want to give out my personal cell phone number to every person that sends me spam or any external person that emails me. It is really quite astonishing to me that Mr. Pak could spend the time to write threatening letters but couldn’t take the time to contact someone inside of TransPerfect and ask for my cell number. It is not a secret to anyone in the company, my cell phone number is available in outlook and in the company directory. I was actually suprised that Mr. Pak refused to apologize after he fully understood everything. He was quite nasty about it and simply said, “You will NEVER get an apology from Skadden!” I know I did nothing wrong, I was just being cautious and trying to not get in any future legal trouble, and I was fully available if Mr. Pak had just even attempted to reach me on my cell, which he did not.
I then proceeded to actually find a way to give him access to the source code in the most secure and quickest way possible. I personally set up a virtual machine in AWS and secured access to it and granted him access right away. It then took Mr. Pak multiple days just to provide the proper forms for the IT department so that access could be given to another Skadden lawyer and two experts hired by Skadden. If everything was so urgent, I don’t know why it took so long for that to happen. Delays caused by Mr. Pak and Skadden don’t seem to matter, but if I am on vacation for 2 days that requires me to be threatened by Board action (a Board which you control and hold all of the power as the deciding vote Mr. Pincus). All of this once again proves to me how much Skadden is biased against me, even though I have been totally cooperative.
Despite how Mr. Pak had treated me, I continued to do everything he asked of me. I got on conference calls with him and his experts. I set up a call with Chris Cowperthwait when Mr. Pak asked for that, keeping it a secret what the call was about, because that is what Mr. Pak asked me to do. I sent email to Jean-Philippe Odent when he asked for that. I answered every question he asked of me. Despite my complete cooperation with Mr. Pak, he remained totally condescending and rude to me when he directed me in email to transmit the source code electronically to him on Sept 19th. I even forwarded the email to Adam Mimeles to get his opinion and his response was “I am also troubled by James’ tone in the other email”. Even with the poor, unprofessional treatment of me by Mr. Pak and Skadden, I personally copied the files onto a secure drive, working late into the night, and hand-delivered them to Mr. Pak in his office instead of delivering it to him in an insecure way (he originally requested insecure unencrypted ftp). I still don’t feel right about being forced to give over Wordfast source code, and I hope I don’t get sued for delivering a copy of it to Skadden and your experts.
I am still totally unclear why Mr. Pak and Skadden had to hire TWO experts to look at the code, neither of which ever asked me even one question about the source code over the course of the past two months. When we had a patent litigation trial, we only needed to hire one expert. The other side only hired one expert. Why Skadden had to pay two experts, spending more TransPerfect money, is beyond me. But I guess when you are not spending your own money it doesn’t matter, just spend, spend, spend.
I had trouble sleeping all weekend long. I kept thinking about the conference call I was asked to participate in on Friday by Credit Suisse with Citi financing bankers. This was the very first call I was asked to participate in related to the sale of the company. I answered all of their technology questions, I explained some of the culture of the company and the growth potential for the future. I gave them my background and how we have grown technology over the past 14 years. At the end of the call I felt really good about myself – reflecting on my fourteen years as CTO I felt that I really have done a lot of great things for TransPerfect. I was proud of what we have built here, and my contributions to TransPerfect.
Then, as the weekend went on, I kept thinking about this being the very first time I have been asked to talk at all to anyone during the sale process. I have clearly been purposely excluded from every other call. I have been given zero indication that I might have a future with the company post-sale, quite the opposite. When the sale process started, I was informed that TransPerfect management would have a seat at the table. There was hope that the senior management of TransPerfect would be able to participate and submit a bid and be a part of the process. Then that promise went unfulfilled.
Senior management does not support a sale to H.I.G., and wanted a chance to compete for company ownership. Our senior management team was told “NO”: you cannot submit a bid, you cannot participate in the process, you have no chance. You, with your actions, have made it abundantly clear that I have no future with the company post-sale, and in fact you don’t really care about the future of the employees of TransPerfect at all. Once you sell the company, you cash out, go back to your wealthy law firm, enriched with unchecked TransPerfect fees, and wait for the Court of Chancery to give you the next opportunity to bill millions of dollars in fees with no accountability and unlimited power.
I, on the other hand, will be out of a job with zero compensation beyond my past salary for the hundreds of millions of dollars in value I created for TransPerfect over the last 14 years of my life. So I thought about that all weekend long and came to the conclusion that I am not going to keep coming to work every day continuing to create value for TransPerfect, just waiting for the day the company gets sold to a competitor and I am out of a job. I just got back from the third annual GlobalLink Next conference in Chicago. It was so uplifting to hear our customers talk about how happy they are that they chose GlobalLink technology, how great TransPerfect is to partner with, how we solve their
problems and how our technology is so much better than the competitors in our space. They know this firsthand because many of them switched from a competitor solution to GlobalLink and sing the praises of the GlobalLink technology. I love our customers. I love the technology I have created here. I love my senior technology team, many of whom have been working for and with me for ten years or more. I love our senior management team. Fourteen years I have been working to build something great, working tirelessly, with so much pride and dedication in my work that I never use up my annual vacation days and thus max out and lose vacation days every year. That has kept me here through all the turmoil, and I have kept my team together through it all. But my contributions are clearly not valued, as evidenced by the lack of a raise in 2 years, and everything else I have outlined in this letter. I just kept asking myself all weekend, “I have no future here, so why am I still here?”This resignation letter is the answer to that question.
Sincerely,
Mark Hagerty, Former CTO of TransPerfect Translations International, Inc.