I’ve been preaching here about the depths of corruption in our Chancery Court for nearly a decade. It hasn’t gotten any better, in spite of my warnings. As I see it and as I’ve seen it, the Chancery Court corruption and cronyism under former Chancellor Andre Bouchard and current Chancellor Kathaleen McCormick amounts to the “court-sanctioned looting” you’ll see in the Delaware Business Now piece below.
I’ll keep this short, so you’ll take the time to read the story below from Philip Shawe, CEO and co-founder of TransPerfect, about the hell he has been through as he and his company have fought this corruption. Sadly, their fight continues into 2024.
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JUDSON Bennett – Coastal Network
Guest view: My worst decision – Incorporating in Delaware
By Philip Shawe, CEO and co-founder of TransPerfect
I have been blessed to have the greatest job in the world. It’s the only one I have had since graduating from NYU business school in 1993. A year before that in 1992, I started TransPerfect with my partner as students—our world headquarters was my dorm room. We were completely broke, so we rented a computer, reduced our food bill down to $2 per day with a steady diet of Ramen noodles and depended on Roy Trujillo, our classmate and present-day COO, to bring extra food home from his all-you-can-eat plan. We must have been the most bootstrapped entrepreneurial (ad)venture that ever was—we plowed every dime back into the business.
With respect to technology, our first computer network consisted of tossing a 5-inch floppy disc back and forth like a frisbee. We used an old-school 600 baud modem to transfer files. Our first brochure bragged of our high-tech ability to transfer files with AOL or Compuserve. From the school library, we had the resources to create call lists. During the business day, we called until our fingers couldn’t take it anymore—at night, we would fax materials. One of the sales I remain most proud of was Upjohn Pharmaceuticals, I’d reached the decision-maker and closed a $26,000 translation project over the phone. Quite a rush—and it seemed like all the money in the world back then. When JCPenney expanded into Mexico, they sent out an RFP with a sample translation. My partner and I actually traveled to Mexico City together to make sure the Spanish that we used in our sample matched exactly what department stores were using in Mexico to describe retail items. We aced the translation test, and I went to pitch JCPenney campus north of Dallas. We were awarded the business, and it was apparent we would need a bigger boat.
So why do I have the greatest job in the world? Because it’s always changing—the demands of growth, the requirements of customers, technological change and the risk of obsolescence—31 years later every day is still an adventure, presenting a new set of challenges. Our long tenured senior management team is like my family—which is a good thing because families of 9000 full-time employees around the world now depend on us making correct business decisions—a responsibility we do not take lightly.
The worst business decision I ever made was moving our state of incorporation from New York to Delaware in 2007. I listened blindly to my business school professors, and believed the puffery that Delaware was a business-friendly venue that valued its corporate residents and would fairly protect and balance the interest of owners, directors, officers, and employees. To say that this is incorrect is an understatement of epic proportion.
Many people have heard of the Delaware TransPerfect case, which to outsiders must seem like a decade long albatross—two equally footed and intractable CEO’s—an anomaly based on the litigious nature of the victorious founder and CEO. Nothing could be further from the truth. What the TransPerfect Case actually is, is a cash register for elite law firms in Delaware that graduate their judges to the bench and hire them back when they leave.
We have tried to rid ourselves of the jurisdiction of Chancery since the case was over in 2018, but I have continued to receive bills that no one can explain for $5 million per year, every year. Kathaleen McCormick, the new Chancellor, says if you stop fighting back, well maybe someday I’ll give your appeal rights and the bills will stop. But I have heard tall tales from a Chancellor before, like this one said to my former partner in open court:
“You’d be naive to think that the maximization of your 50 percent interest is this Court’s driving concern. It is not. This is a court of equity, but you should not expect to get a windfall from this Court that you failed to obtain for yourself when you structured your ownership in this enterprise.”
And if I’d taken this Chancellor at his word, I wouldn’t have been prepared for the unprecedented public auction he ordered, and my life’s work would have been flipped to private equity — thousands of workers would have ruthlessly lost their jobs to what Andre Bouchard, Kathaleen McCormick and their PE friends refer to as “synergies.”
There is a public hearing on January 4th, where the court is setting to use its contempt power to force TransPerfect to pay another $5 million—a less charitable way to fairly characterize this vortex in which we are trapped, is “court-sanctioned looting.” My, how times have changed since the dorm room. At one-point TransPerfect couldn’t pay two students enough to eat, but we fought to keep it going.
Now, the Chancery Court has already ordered TransPerfect to pay a Custodian and his law firm Skadden Arps over $53 million, for nothing but the destruction of company and shareholder value. It would have buried a lesser company—but mark my words, the insatiable gullets of these elite Chancery-friendly law firms aren’t full yet. I’m blessed to have built and led TransPerfect from the dorm to an industry leader with 32 years of hard work and innovation—and our entrepreneurial spirit is still burning strong. I’m also living and breathing proof that when the CBS News or the Center for Public Integrity calls Delaware “an American Haven for Grand Corruption,” they are telling the truth.