EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

08.30.08

Novell and Fraud (Updated)

Posted in Fraud, GNU/Linux, Microsoft, Novell at 7:45 am by Dr. Roy Schestowitz

…and Paying People to Shut Up About It

Debit/Visa card

Games around credit are painfully familiar to many. As background, consider Novell’s serious financial issues, which may have led the company to selling its soul to Microsoft within months. In a previous post from yesterday, Novell's latest problems were highlighted. The losses continue to widen as the cash cows run thin.

Novell’s history when it comes to fraud is well documented. Consider this old report for example.

After more than seven years in the courts, Novell will spend $13.9 million to make a securities fraud class-action lawsuit go away.

Attention is needed here. Novell’s cronies were not cleared of charges; instead, they bailed out. This does not make the behaviour acceptable. According to yesterday’s article from the Register, “th[e latest] was turned into a loss of $15m for the period because of a debt write-off.”

Did anyone spot that? Yes, debt.

Novell has previously admitted — albeit in private — that it is 'cooking the books'. This indicates that not much has changed since that class-action lawsuit over fraud.

Such things might not be rare, but it does not make them justified, either. Here are a couple of examples.

Former Apple CFO, Fred Anderson, made accusations against Steve Jobs. According to Associated Press, Gene Munster of Piper Jaffray said “It gives the appearance that, ‘I had a partner in crime and it was Steve Jobs.’” Here is an article from The Register.

Apple’s Board of Directors is backing CEO Steve Jobs after former CFO Fred Anderson accused Jobs approving the company’s stock option backdating. Anderson settled civil charges against him Tuesday without admitting any guilt, but agreeing to pay back approximately $3.5m to make up for personal gains in the scandal.

Eventually, they managed to sneak away from justice, assuming these allegations were true in the first place, which is likely. Welcome the juridical system of the 21st — a system where you can commit a crime and get away with, provided you are wealthy enough and can buy people’s silence.

After presiding over a 50 percent rise in Apple’s stock over the past year, CEO Steve Jobs can afford to shrug off shareholder questions about stock option backdating and environmental policies.

Microsoft too has paid for skeptics to take their claims of fraud elsewhere. This includes a Microsoft executive that accused Microsoft of fraud. Microsoft paid money for these claims of fraud to just go away.

What about regulation? The SEC proved its impotence when it let SCO off the hook just a while before they declared their surprise bankruptcy.

Tomorrow’s IRC logs will contain a lot more information about it. This requires tidying up. Meanwhile, watch this new comment from Linux Today:

Generous Gates has yet to give away money to match the huge amounts that the Foundation saved in taxes (ie, the bill you and I pick up).

This is only the tip of the ice-berg of Generous Gates’ generosity.

http://boycottnovell.com/2008/08/13/smithers-on-massive-msft-losses

PS. Generous Gates is converting his paper money inflated wealth into safer currencies courtesy of means such as Ma’s and Pa’s savings (including their pension funds). Secrecy and tricks (such as using a nonprofit Foundation) ensure Ma and Pa buy MSFT real high, kind of like those Enron folks that bought real high, too.

PS2. Gates private investments are benefiting mightily from the Foundations’ donations. Of course, the more billionaires that participate, the more difficult it is to trace down the back-scratching.

The Gates Foundation is a sensitive subject that was covered before, e.g. here. There’s not much goodwill out there, except for in the minds of those that live in a fantasy world. The same goes for other companies and individuals, but one has to be intimately familiar and backed by verifiable proof to make the proper allegations.

Here is an old article that is also relevant. [Update: this article seems to have been pulled over a year ago, but the Internet Archive has a copy]

Microsoft’s past stock options practice poses questions

[...]

Microsoft in 1999 announced that it would end a policy of awarding options at monthly lows and said it would take a $217 million charge, though many details of that discontinued practice haven’t been widely known, The Wall Street Journal said Friday.

Those details raise questions about how Microsoft began the practice, what prompted the company to end it and whether the way the options were dated–at 30-day lows the month after they were granted–influenced other companies, it said.

If S.u.S.E. was acquired by a corrupt company, which seem true based on the citation at the top, then it can hopefully isolate and dissociate itself from Novell some time in the future. OpenSUSE could do this.

Microsoft may now be injecting money into Novell in order to keep its strategy against GNU/Linux, ODF and Free software going. Suffice to say, Novell is provably a friend of Microsoft more than it is a friend of Free software. Novell is not SUSE. It’s broader than SUSE.

Novell and Vista

Update #2: Another comment on the article above (from the Internet Archive):

Lessons of Enron

I’m not going to jump on the microsucks band wagon. I would point out that if the enron scandal held any lessons for us, it should be that questionable business practices should be dealt with harshly. I wonder how many other companies are well on their way down the enron road? What will it do to the economy when the s*** finally hits the fan?

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

6 Comments

  1. Alec Baldwin said,

    August 30, 2008 at 12:59 pm

    Gravatar

    Utter nonsense. Roy Cluelessowitz – Balders is back.

    You demonstrate about as much understanding of business as the average door-stop.

    Novell has in excess of $1bn in cash. Novell is “cooking the books, and admitted it?” Do you have any idea what the SEC Filing process was all about? And what the end result was?

    Why, if all you say is true, is the share-price rising, is revenue growing, is margin from operations increasing, are investors (who would presumably have more of a clue than you) investing? All these experienced business people, must be real dumb… maybe they should listen to you, after all you sound like you have years and years of experience in business….

    You’re a 9-yr old.

    LOL

  2. Roy Schestowitz said,

    August 30, 2008 at 1:17 pm

    Gravatar

    A lot of businesses which claims to have money in the bank may have just borrowed it, but that’s not the point.

    Start here.

  3. Alec Baldwin said,

    August 31, 2008 at 3:01 pm

    Gravatar

    This is hysterical. Are you now suggesting that the annual accounts filed by Novell and legally verified, are inventions? Are you suggesting that Novell has “borrowed” 1 BILLION Dollars?

    I am crying with laughter. It’s the ultimate in FUD. It’s like saying, “I have nothing to say, so why don’t I just cast doubt on the facts with an attention-seeking tabloid-esque headline…”

    Your cluelessness is apparently plumbing new depths.

    Keep going Roy the Boy – you are making a fool of yourself, and becoming more of a joke as each new post arrives…

  4. Roy Schestowitz said,

    August 31, 2008 at 3:27 pm

    Gravatar

    The more I explore, the uglier it seems and I shall post a followup to this post, which will contain the latest findings.

    “Alec Baldwin”, you only ever show up in this Web site when Novell is shown to be in trouble. How come?

  5. Jose_X said,

    August 31, 2008 at 10:33 pm

    Gravatar

    From what little I know, I don’t know if Novell has done anything illegal. The impression I have gotten over the years is that there are some very questionable laws in the books. Just recently the SEC(?) announced that a new method of accounting will be phased in for public companies to match international rules. It makes sense from a competitive point of view, internationally, but this would be making laws that have problems even more lax (supposedly the new methods are more lax).

    >> Why, if all you say is true, is the share-price rising, is revenue growing, is margin from operations increasing, are investors (who would presumably have more of a clue than you) investing? All these experienced business people, must be real dumb… maybe they should listen to you, after all you sound like you have years and years of experience in business….

    If a company was cooking the books, anything could be showing up on their reports, and share price is determined in part by this (which under the assumption would be lies).

    Further share price can rise if the market generally wants that, and this can be for many reasons. For example, experience investors might feel that Novell would “get away” with whatever it was doing (at least for a while) without a problem and hence be willing to buy. Enron and Bear Sterns were very high right up to the end. Perhaps questionable practices might work during certain conditions but become too risky during others. Possible examples of varying conditions might be Microsoft maintaining their monopoly levers vs. losing them; Microsoft and Novell being called out by antitrust authorities soon vs. never; and the economy being strong or not.

    Do note that NOVL dipped to it’s lowest value in years just months ago. It’s current pop still leaves it very low. Microsoft’s help might allow NOVL to rise a good amount over the next few years. Perhaps more likely however is that this help has kept it from tanking (as I think has been suggested on this site). Look at SCOX’s lawsuit. The stock had a large bounce that lasted for a couple years I think, at which point (much as NOVL looks today) it went below the price at the time of the announcement and has kept sinking to this day.

    One thing Roy would like (from what I gathered from IRC conversation) is to have the rules changed to be sensible (whatever “sensible” might be). A lot of people would like that wrt public accounting rules/practices. *Some* of the “outing” on this site is to focus on the ethical issues and on the future prospects (perhaps using Novell and Microsoft as the model in cases where others do the same thing), independent of the legal situation. Companies doing business with Microsoft should know that Microsoft is most definitely not among the more ethical corps.

    Buffett had this to say wrt stock options not being expensed [ http://money.cnn.com/2004/05/03/pf/buffett_qanda/index.htm in 2004 ]:
    >> Already up on the soapbox, Buffett and Munger went straight into a denunciation of everyone who opposes treating stock options as an expense. To Berkshire’s bosses, it is not just a technical accounting question, but a matter of fundamental morality.
    >> “Write your congresspeople giving them your views on whether options should be expensed,” said Buffett. “It was a disgrace 10 years ago when Congress bludgeoned the SEC and the [Financial] Accounting Standards Board to override FASB’s decision to expense options. It accelerated the anything-goes mentality of the 1990s.”
    >>…After the audience stopped laughing, Buffett came to his point about options, “The U.S. Senate concluded that the world was flat, because their their contributors paid them enough to say the world was flat.”
    >> Then Munger weighed in: “It’s worse than that. Those people who wanted to round pi to 3.2 were stupid. These people [the opponents of expensing options] are worse than stupid. They know it’s wrong and want to do it anyway.”

    Problem though. I think stock options are expensed today; however, Bill Parish and others don’t like the model being used (Black Sholes). For companies like Microsoft over the past two decades, this formula would underestimate significantly the options impact on share holder wealth in the future as the options vested. See, http://boycottnovell.com/2008/08/13/smithers-on-massive-msft-losses

    Microsoft also took huge advantages of something else, the so-called “Stock Options Income Tax Benefit”. While Microsoft was paying their bills without incurring expenses on their financial reports (eg, see Buffett comment above), for tax purposes, the IRS was treating it as if they were spending that money. Hence Microsoft has stellar financial reporting AND was not paying income taxes due because of huge tax breaks (eg, of some $4 to $5 billion in 1999 IIRC). If you look at their reports (eg, 1999), you see a very large tax bill, but then also this Options Benefit which in various years neutralized the taxes with left over credits for use in future years. The law allowing this is horrible and doesn’t even reward the intended recipients (young innovative high growth companies) in light of the behemoth monopolists (MS, Cisco, etc) that were stealing their thunder using extraordinary large options grants and market controls.

    So we come to this: if laws were passed that allowed a few companies to (eg) print their own money, it would be legal for the time being and investors would scoop it up. Eventually the chickens might come home to roost if the laws or circumstances change.

    Also, just because the laws existed doesn’t make it healthy for the nation.

    Another tidbit: Microsoft plays around with risky derivatives. They have a lot of inside information on the economy because of their particular position. This allows them to play with derivatives fire and get away with it, but they will make mistakes as you can read about in this same link Roy S posted above: http://www.billparish.com/msftfraudfacts.html

    [Note, the link from the Linux Today posting has an extraneous space within it so appers to be a dead link.. use this: http://boycottnovell.com/2008/08/13/smithers-on-massive-msft-losses ]

    BTW, Microsoft’s minting of stock options until the last few years means there is probably a solid ceiling/resistance and/or plain old downward pressure on MSFT as these options vest/mature, at least for the duration of those options (the following article states 10 years beyond when they are vested which I think in some cases is like 7 years from when they were given out).

    From http://knowledge.wharton.upenn.edu/article.cfm?articleid=825
    >> ..Options are more profitable in a rapidly rising market. On the other hand, if the price fell to $50, options giving the right to buy at $75 would be worthless — “underwater” or “out of the money.” The 50 shares of stock, however, would be worth $2,500. Stock is better in a falling market.

    Smart investors and market makers like to keep prices high until the very end. Most of these anticipate major news events, if not the actual dates, at least that the events and stock movements up/down are coming.

    Many MSFT employees at some point are likely to be terribly disappointed. The smart ones likely jumped ship.

    The business world loves to bypass government regulations. They are always pushing the limits of new financial instruments and practices to make a buck. There is just too much money to be made before the economy and gov catch up. But the hang-over usually does come in one way or other, much like the hot potato eventually burns whoever is holding it at the wrong moment. People thinking MS will be strong in 20 and 30 years (or maybe even 5) might be way off, but we’ll see.

    Just like Gates did a 180 on his position on patents based on convenience, I would not be surprised if he eventually favors laws that benefit the small companies over the large.. this would be once the MS titanic was sunk and just as his B&M Foundation aided small private companies are poised to rise. [Just a guess.]

  6. Roy Schestowitz said,

    September 1, 2008 at 4:05 am

    Gravatar

    Many MSFT employees at some point are likely to be terribly disappointed. The smart ones likely jumped ship.

    That too has happened.

What Else is New


  1. Links 20/10/2014: Cloudera and Red Hat, Debian 7.7, and Vivid Vervet

    Links for the day



  2. Links 20/10/2014: 10 Years Since First Ubuntu Release

    Links for the day



  3. How Patent Lawyers Analyze Alice v. CLS Bank

    Breaking down a patent lawyer's analysis of a Supreme Court's decision that seemingly invalidated hundreds of thousands of software patents



  4. Is It Google's Turn to Head the USPTO Corporation?

    The industry-led USPTO continues to be coordinated by some of its biggest clients, despite issues associated with conflicting interests



  5. The EPO's Public Relations Disaster Amid Distrust From Within (and EPO Communications Chief Leaves): Part VII

    Amid unrest and suspicion of misconduct in the EPO's management (ongoing for months if not years), Transparency International steps in, but the EPO's management completely ignores Transparency International, refusing to collaborate; the PR chief of the EPO is apparently being pushed out in the mean time



  6. Links 18/10/2014: Debian Plans for Init Systems, Tails 1.2

    Links for the day



  7. Links 18/10/2014: New ELive, Android Expansion

    Links for the day



  8. Another Fresh Blow to Software Patents (and With Them Patent Trolls)

    Another new development shows that more burden of proof is to be put on the litigant, thus discouraging the most infamous serial patent aggressors and reducing the incentive to settle with a payment out of court



  9. Links 16/10/2014: New Android, SSL 3.0 Flaw

    Links for the day



  10. How the Corporate Press Deceives and Sells Microsoft Agenda

    Various new examples of media propaganda that distorts or makes up the facts (bias/lies by omission/selection) and where this is all coming from



  11. Vista 10 is Still Vapourware, But We Already Know It Will Increase Surveillance on Its Users and Contain Malicious Back Doors

    The villainous company which makes insecure-by-design operating systems will continue to do so, but in the mean time the corporate press covers only bugs in FOSS, not back doors in proprietary software



  12. Links 15/10/2014: KDE Plasma 5.1 is Out, GOG Reaches 100-Title Mark

    Links for the day



  13. With .NET Foundation Affiliation Xamarin is Another Step Closer to Being Absorbed by Microsoft

    Xamarin is not even trying to pretend that separation exists between Microsoft and its work; yet another collaboration is announced



  14. The EPO's Protection Triangle of Battistelli, Kongstad, and Topić: Part VI

    Jesper Kongstad, Benoît Battistelli, and Zeljko Topić are uncomfortably close personally and professionally, so suspicions arise that nepotism and protectionism play a negative role that negatively affects the European public



  15. Corporate Media Confirms the Demise of Software Patents in the United States; Will India and Europe Follow?

    It has become increasingly official that software patents are being weakened in the United States' USPTO as well as the courts; will software leaders such as India and Europe stop trying to imitate the old USPTO?



  16. Links 14/10/2014: CAINE 6, New RHEL, Dronecode

    Links for the day



  17. Microsoft's Disdain for Women Steals the Show at a Women's Event

    Steve Ballmer's successor, Satya Nadella, is still too tactless to lie to the audience, having been given --through subversive means -- a platform at a conference that should have shunned Microsoft, a famously misogynistic company



  18. SCOTUS May Soon Put an End to the 'Copyrights on APIs' Question While Proprietary Giants Continue to Harass Android/Linux in Every Way Conceivable

    Google takes its fight over API freedom to the Supreme Court in the Unites States and it also takes that longstanding patent harassment from the Microsoft- and Apple-backed troll (Rockstar) out of East Texas



  19. Patent Lawsuits Almost Halved After SCOTUS Ruling on 'Abstract' Software Patents

    The barrier for acceptance of software patent applications is raised in the United States and patent lawsuits, many of which involve software these days, are down very sharply, based on new figures from Lex Machina



  20. Links 13/10/2014: ChromeOS and EXT, Debian Resists Systemd Domination

    Links for the day



  21. Links 12/10/2014: Blackphone Tablet, Sony's Firefox OS Port

    Links for the day



  22. Links 9/10/2014: Free Software in Germany, Lenovo Tablets With Android

    Links for the day



  23. Links 8/10/2014: A Lot of Linux+AMD News, New ROSA Desktop Is Out

    Links for the day



  24. Lawyers' Propaganda About Software Patents and a New AstroTurf Entity Called Innovation Alliance

    Patent propaganda and deception from patent lawyers (among other parasites such as patent trolls) continues to flood the Web, intersecting with reports that prove them totally wrong



  25. How Microsoft Handles Disasters: Grace Hopper Conference Has Been Infiltrated by "Microsoft Disaster Response"

    Free/Open Source software (FOSS) must be a disaster to Microsoft's bottom line because Microsoft is sending "Microsoft Disaster Response" to infiltrate and disrupt a conference about women in FOSS



  26. Links 8/10/2014: Gummersbach Moves to GNU/Linux, Docker Acquires Koality, KDE Frameworks 5.3

    Links for the day



  27. Links 7/10/2014: CAINE 6.0, PC-BSD 10.0.3

    Links for the day



  28. Benoît Battistelli's Balkan Standards in EPO: Part V

    How the European Patent Office facilitated the inclusion of previously-connected elements that are best known for misconduct and dirty politics



  29. Symptoms of Post-x86 Era: Even Intel Apologists Turn Against Bribes-Dependent Intel While Microsoft Continues to Deceive Journalists on Patents in Order to Create a Scare

    The Wintel press, which is bribed by companies that it covers, is challenged by prominent developers and Microsoft continues to plant its patent propaganda in the Wintel-centric (and paid) press



  30. Microsoft Reinforces Its Criminal Organisation Status by Bribing and Corrupting More Officials, Even in Europe

    More criminal activity from Microsoft in Romania and a new TV programme that sheds light on Microsoft's dirty assault on Free software in France


CoPilotCo

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

CoPilotCo

Recent Posts