I am sending this complaint to the Securities Exchange Commission (firstname.lastname@example.org) to describe the illegal actions being taken by BayStar Capital LP, Boies Schiller & Flexner, Jeff Hunsaker, Microsoft Corporation, Thomas Raimondi, Royal Bank of Canada, The SCO Group, Inc., and Vulcan Capital. These entities have committed numerous crimes centered around the recent activities of The SCO Group, Inc.
My specific complaints are:
1. SCO is grossly exaggerating the value of its intellectual property by claiming ownership of operating systems actually owned by other people. This exaggerated claim is a fraud on the investing public. Among my experiences in investing I learned to understand the Vancouver Exchange gold mine fraud which seem to always be with us. Typically a Vancouver Exchange gold mine promoter finds some gold, which is easy to do, but of course the gold deposit is too small or too dilute to be profitably mined. Then the promoter forms a penny stock company which owns the gold claim and begins hyping the stock. There is actually some gold in the company's mining claim but the promotion propaganda exaggerates the claim into the greatest strike since the Comstock lode. If the promoter succeeds in creating a stock price bubble then he sells as much stock as he can until the bubble bursts leaving the current crop of gullible investors with heavy losses. I am sure that the investigators at the SEC are thoroughly familar with Vancouver Exchange gold mine stock frauds. Now comes SCO with a new twist on the Vancouver Exchange gold mine fraud. SCO has a contested claim to ownership to an obsolete computer operating system called System V which has a microscopic share of the market for operating systems. SCO has hyped this asset into a claim of ownership of several other Unix style operating systems sold by competing companies. The SCO propaganda has created a stock price bubble in SCOX stock and the SCO insiders are methodically selling SCOX stock at inflated prices. A. SCO sells a computer operating system called System V which SCO sells under the brand name of UnixWare. http://www.caldera.com/products/unixware713/ UnixWare has a small share of the operating system market. That share has been steadily shrinking for several years because UnixWare is gradually becoming obsolete. http://www.computerworld.com/news/2000/story/0,11280,41643,00.html B. Linux is a operating system written by Linus Torvalds and an army of volunteers who donate their creativity for free. http://www.linux.org/ To my personal knowledge IBM has at least a 40 year history of competing development projects. IBM has often developed both software and hardware products by setting up two development projects unbeknownst to each other and giving both project teams the same assignment. Then IBM chooses to market the project with better product results and gives the axe to the unsuccessful project. When this happens there is great consternation among the members of the losing project team. The Monterey project was started as a joint venture with SCO to create an operating system based on System V code which works on large IBM computers. Then later IBM started a second project team with the same goals as Monterey except the second project was based on Linux. Great was SCO's consternation when Monterey was axed in favor of IBM's Linux project. SCO sued IBM for contributing operating system code allegedly owned by SCO to the Linux operating system. http://news.com.com/2100-1016-991464.html IBM has contributed code to the Linux operating system. SCO claimed that the contributed code was written and owned by SCO. This claim was widely and repeatedly publicized. http://www.mozillaquest.com/Linux03/ScoSource-20-CodeReview_Story01.html quoting MozillaQuest: "Simply take a look at this excerpt from the letter Darl McBride and SCO-Caldera sent out to at least 1,500 companies, including Fortune 500 and Forbes 1000 top companies. It is that letter that precipitated the German Linux community's successful legal counterattack against SCO-Caldera. That letter, dated 12 May 2003, states in part: Linux is, in material part, an unauthorized derivative of UNIX . . . We have evidence that portions of UNIX System V software code have been copied into Linux . . . legal liability that may arise from the Linux development process may also rest with the end user . . . We intend to aggressively protect and enforce these rights . . . we are prepared to take all actions necessary to stop the ongoing violation of our intellectual property or other rights." SCO told the investing public that SCO would reap huge profits from the damages that IBM would have to pay for illegal distribution of SCO code. http://webreprints.djreprints.com/875991416323.html#top In the SCO v IBM court hearings SCO lawyers have dropped their claim that System V code was contributed to Linux after SCO was unable to produce any evidence supporting that claim. SCO now claims that the code in question was written by IBM but belongs to SCO anyway. http://www.groklaw.net/article.php?story=2003121122033016 http://www.theage.com.au/articles/2004/02/09/1076175080452.html This is in spite of clear legal precedents, most notably AT&T v BSD, which clearly state that the code written by SCO belongs to SCO and the code written by IBM belongs to IBM. http://www.groklaw.net/article.php?story=20031128153414688 The code that IBM has contributed to Linux is publically available to anyone. IBM has demanded that SCO identify which lines of that code are the stolen code. SCO has never answered that question. On December 5, 2003 Judge Brooks Wells ordered SCO to answer that question in great detail within 30 days. http://www.groklaw.net/article.php?story=2003121122033016 On March 3, 2004 Judge Brooks Wells found that SCO had not complied with the December 5 order and issued the order again with a 45 day deadline. http://www.groklaw.net/article.php?story=20040303195948664 Even when ordered to do so in a court case that SCO must win in order to survive as a company, SCO cannot provide specific evidence that IBM gave any SCO intellectual property to Linux. IBM explains the importance of the absence of evidence to Judge Kimball this way. http://www.groklaw.net/article.php?story=20040521183116140 C. SCO claims ownership of Linux. SCO's claims are partially based on their claimed ownership of the IBM code contributed to Linux. SCO also claims that 65 Linux programs were copied from SCO's version of Unix. http://lwn.net/Articles/64052/ Linus Torvalds has documentary proof that he wrote the code claimed by SCO. http://www.ussg.iu.edu/hypermail/linux/kernel/0312.2/1241.html SCO claims ownership of Linux and is demanding that corporations which use Linux pay SCO a licensing fee to use Linux. SCO sent a letter to 1500 corporations claiming ownership of Linux and threatening to bill for Linux. These threats have never been carried through because SCO would be indicted for mail fraud, billing for something that they do not own. http://lwn.net/Articles/43085/ http://www.cxotoday.com/cxo/jsp/index.jsp?file=template0.jsp&storyid=472žion=News&subsection=Business&subsection_code=1 http://www.groklaw.net/staticpages/index.php?page=20030929022014462 http://www.informationweek.com/story/showArticle.jhtml?articleID=17100017 http://www.forbes.com/forbes/2003/1124/096_print.html SCO is asking operating systems resellers to sell an "Intellectual Property License for Linux". SCO expects the threat of lawsuits to create new revenue for both the resellers and SCO. http://www.vnunet.com/News/1152257 However the investing public has been repeatedly told that SCO owns Linux and is about to bill 1500 major corporations huge amounts of money in Linux licensing fees. D. Two German courts ruled that SCO's claims to own Linux was a criminal offence in Germany and SCO must stop making such claims in Germany. Subsequently, SCO was fined 10,000 euros for continuing to make false claims in Germany that SCO owns Linux. May 28, 2003 The Bremen, Germany Regional Court ruled in favor of Univention GmbH and issued a preliminary injunction against SCO-Caldera. "The order prohibits SCO-Caldera from circulating: 'the idea that the Linux Operating System illegitimately acquired and contains the Intellectual Property of SCO UNIX and/or that the end users of LINUX can be made liable for patent/copyright infringements against SCO's intellectual Properties.'" http://www.mozillaquest.com/Linux03/ScoSource-19-Injunction_Story01.html The injunction was based on the fact that SCO had no proof of any of its intellectual property claims. The injunction gave Univention the right to ask for a permanent injunction if SCO did not provide such proof within 30 days. June 5, 2003 The Munich, Germany District Court ruled in favor of Tarent GmbH and issued a permanent injunction against SCO-Caldera which is very similar to the Bremen injunction. http://www.tarent.de/html/tarent-vs-sco/030612_Questions-and-Answers.html September 2, 2003 SCO Group was fined 10,000 Euros (about US$11,000) by the Munich court for violating the June 5 injunction. http://www.computerworld.com/softwaretopics/os/linux/story/0,10801,84564,00.html February 18, 2004 Univention GmbH and SCO Group GmbH agreed to an out of court settlement of the Bremen case. In this agreement: "1) SCO Group GmbH (German branch of SCO) has agreed not to allege any more that Linux contains SCO's unlawfully acquired intellectual property. 2) The settlement also forbids SCO from claiming that if end users are running Linux they might be liable for breaches of SCO's intellectual property. 3) Also they cannot say that Linux is an unauthorized derivative of Unix. 4) Finally SCO Group GmbH is prohibited to threaten to sue Linux users unless they bought SCO Linux or Caldera Linux." http://www.groklaw.net/article.php?story=20040301025634926&mode=print Here is the agreement in German. http://www.computerwoche.de/index.cfm?pageid=254&artid=58483&main_id=58483&category=8&currpage=1&kw= Here is an English synopsis of the agreement. http://www.groklaw.net/article.php?story=20040301025634926 So in Germany the courts have ruled that SCO's claims against Linux are completely unsubsantiated. And in spite of the German court orders SCO is still fraudently claiming in Germany that SCO will make "millions or up to billions of profit" by selling licenses for intellectual property that SCO does not own. http://www.groklaw.net/article.php?story=20040413122355148 E. Red Hat is a company whose main product is distributing Linux operating systems. Red Hat sued SCO in the United States to contest SCO's claims to own Linux. http://news.com.com/2100-7252-5059547.html?tag=nl F. Embedded Linux is a small version of Linux used in such things as mobile phones and handheld computers. http://www.linuxdevices.com/articles/AT9952405558.html SCO claims ownership of Embedded Linux and demands a $32 fee for each embedded device using Linux even though SCO has absolutely no logical or legal basis for such a claim. SCO's claim to Linux is that IBM donated SCO code to Linux. The code that IBM has contributed to Linux allows Linux to work well on extremely large computers. Such code is inappropriate for embedded devices and it is impossible for embedded devices to run the IBM code. http://www.eet.com/sys/news/OEG20030806S0025 Once again the general investing public has been told that SCO will reap huge amounts of money by selling an operating system, embedded Linux, that SCO does not own. G. BSD is an operating system that was developed at the University of California, Berkeley using government grants handed out to develop the Internet. AT&T sued the University of California claiming that AT&T owned the BSD operating system. Early in the trial the court ruled that the code written by AT&T was owned by AT&T and the code written by University of California was owned by the University of California. The story is complicated because both operating systems have changed ownership. BSD is currently owned by Berkeley Software Development and System V ownership is currently disputed between Novell and SCO. There is a court sanctioned 1994 agreement between (now) BSD and Novell deliniating what code is owned by each. Also the agreement states that Novell or its successor, SCO, (if in fact SCO is Novell's successor as SCO claims and Novell denies) can never again sue over the BSD code. http://www.groklaw.net/article.php?story=20031128153414688 SCO claims ownership of BSD even though Novell thoroughly lost any and all claims to BSD in 1994 so that Novell can not possibly have sold BSD to SCO. SCO has threatened to reopen the BSD suit even though to do so is forbidden by the agreement settling the case. This creates the false impression among public investors that SCO owns BSD. http://www.newsforge.com/business/03/11/18/1742216.shtml H. SCO claims ownership of all Unix operating systems. http://radio.weblogs.com/0120124/2003/09/06.html Eric Raymond gives a comprehensive explanation of why SCO's claims to own all of Unix are false. http://www.opensource.org/sco-vs-ibm.html#id2790728 In fact SCO owns only a disputed claim to System V. Claiming ownership of all the other Unix operating systems is a gross exaggeration of SCO assets and is a fraud against the investing public. I. Novell is the company from which SCO obtained a contract to sell System V. Novell strongly disputes the exaggerated size of the intellectual property claimed by SCO. Novell's position is that SCO has the right to sell System V but SCO does not own System V. http://www.wired.com/news/technology/0,1282,59013,00.html http://www.infoworld.com/article/03/12/22/HNnovellSCO_1.html http://www.theage.com.au/articles/2004/01/08/1073437391747.html Here is the agreement between Novell and SCO. http://www.groklaw.net/article.php?story=2003111023050367 Here is the correspondence between Novell and SCO. http://www.novell.com/licensing/indemnity/legal.html In the list of assets excluded from the sale are: "Schedule 1.1(b) Excluded Assets (Page 2 of 2) V. Intellectual Property: A. All copyrights and trademarks, except for the trademarks UNIX and UnixWare. B. All Patents" SCO is suing Novell in an attempt to obtain clear title to Unix. http://www.iht.com/articles/125939.html SCO is deceiving the investing public by falsely claiming to have purchased Unix in its entirety from Novell. J. BSD has a valid claim to partial ownership of System V. BSD allows anyone to use BSD code as long as the source code displays the BSD copyright notice. In the law case explained in section G, AT&T barred BSD from using AT&T code but BSD said that AT&T was welcome to use BSD code, provided that it was copyrighted as BSD code. SCO accidently showed that some of System V code actually belongs to BSD when SCO held a public viewing of some code that they claimed was SCO code illegally added into Linux. The BSD code would also be legal in System V if SCO included the BSD copyright notice in the code. SCO did not include the BSD copyright notice in the example of BSD code that they claimed was SCO code illegally incorporated into Linux. http://www.perens.com/SCO/SCOSlideShow.html Therefore System V contains some BSD code but the amount of BSD code in System V is not public knowledge. SCO says that there are millions of lines of SCO code in Linux. If in fact there are millions of lines of BSD code in both Linux and System V then a very significant portion of System V is actually owned by BSD. http://josiah.ritchietribe.net/blog/index.php?p=469&c=1 Ransom Love is a former CEO of the company now called SCO. When discussing the possibility of releasing SCO code as Open Source software Ransom Love said, "Some code, however, can't be open sourced because other companies own it." http://www.practical-tech.com/infrastructure/i08042000.htm By not providing information as to how much of System V is owned by BSD SCO is misleading the general investing public about the value of the System V asset. By claiming ownership of BSD code SCO is committing fraud. K. SCO has sent letters to about 6000 SCO customers stating that SCO owns Linux and that the terms of the contract between SCO and each customer forbids the customer from using Linux unless the customer pays SCO for Linux. SCO demanded that each customer certify that they had not inserted any SCO code into Linux.. http://www.groklaw.net/article.php?story=20040106112439165 This letter has received wide publicity and creates the false impression among investors that SCO will receive money for Linux from the existing SCO customers. L. When SCO sued IBM, SCO hired a prominent law firm, Boies, Schiller, and Flexner to handle the case. SCO initially told the general investing public that Boies, Schiller, and Flexner was working on a contingency basis. This created the false impression among the general investing public that Boies, Schiller, and Flexner was so confident of SCO's chances of winning the IBM case that they would accept the case on a contingency fee basis. http://zdnet.com.com/2100-1104-1010981.html "SCO's legal costs are being paid under a contingency arrangement, McBride said. In such cases, lawyers typically are paid not by the hour, but with a percentage of whatever money they can win for their clients in the case." In fact Boies, Schiller, and Flexner is being paid a retainer fee and is billing SCO at hourly rates, as well as a 20% contingency fee on windfall profits from equity sales. http://www.sec.gov/Archives/edgar/data/1102542/000110465903028046/a03-6084_1ex99d1.htm M. The SCOX stock price has risen spectactularly since SCO began claiming exaggerated worth of their intellectual property. http://bigcharts.com/custom/washingtontimes-com/interactivechart.asp?sid=&o_symb=scox&symb=scox&x=0&y=0&time=9&uf=7168&compidx=aaaaa%3A0 http://lwn.net/Articles/75129/ N. SCO insiders have registered the following SCO stock sales with the Securities Exchange Commission during the period of March 6, 2003 through April 7, 2004. SCO insider sales from March 6, 2003 through April 7, 2004 ------------------------------------------------------------- Date Name Shares Amount 04/08/2003 Robert Bench 4,100 $11,890.00 03/10/2003 Robert Bench 7,000 $21,420.00 04/08/2003 Robert Bench 4,100 $11,890.00 06/03/2003 Opinder Bawa 15,000 $90,000.00 06/04/2003 Opinder Bawa 7,916 $52,245.60 06/06/2003 Jeff Hunsaker 5,000 $44,500.00 06/09/2003 Robert Bench 3,000 $27,788.00 06/11/2003 Michael Olson 6,000 $51,820.00 06/20/2003 Reginald Broughton 5,000 $55,446.00 06/25/2003 Reginald Broughton 5,000 $50,000.00 07/08/2003 Robert Bench 7,000 $77,213.00 07/09/2003 Jeff Hunsaker 5,000 $59,000.60 07/11/2003 Michael Olson 8,000 $84,208.00 07/14/2003 Sean Wilson 6,000 $65,045.00 07/15/2003 Sean Wilson 6,000 $64,240.00 07/22/2003 Reginald Broughton 20,000 $242,893.00 07/23/2003 Jeff Hunsaker 5,000 $66,694.00 07/30/2003 Reginald Broughton 5,000 $64,001.00 08/05/2003 Reginald Broughton 5,000 $62,819.00 08/08/2003 Robert Bench 7,000 $76,300.00 08/11/2003 Michael Olson 5,000 $46,270.00 08/13/2003 Jeff Hunsaker 5,000 $50,000.00 08/19/2003 Reginald Broughton 5,000 $52,028.00 08/25/2003 Jeff Hunsaker 5,000 $71,400.00 08/26/2003 Reginald Broughton 5,000 $73,700.00 09/02/2003 Reginald Broughton 5,000 $73,555.45 09/09/2003 Reginald Broughton 5,000 $90,262.00 09/11/2003 Michael Olson 7,000 $122,850.00 09/14/2003 Reginald Broughton 2,450 $49,000.00 09/15/2003 Reginald Broughton 2,550 $51,199.00 10/08/2003 Robert Bench 6,800 $112,880.00 10/13/2003 Michael Olson 10,000 $141,486.50 12/29/2003 Duff Thompson 10,000 $174,860.00 01/07/2004 Thomas Raimondi 11,841 $210,189.59 01/26/2004 Larry Gasparro 5,259 $81,076.06 02/04/2004 Thomas Raimondi 11,841 $170,510.40 03/03/2004 Thomas Raimondi 11,841 $143,276.10 04/07/2004 Thomas Raimondi 11,481 $128,736.45 04/07/2004 Jeff F. Hunsaker 5,976 $66,733.84 ------- ------------- Totals 268,255 $3,149,426.59 http://ir.sco.com/edgar.cfm
2. Microsoft has invested in SCO equity above the 5% reporting threshold without revealing their true identity. A. SCO's strategy of suing their own customers and potential customers for using Linux or for ignoring SCO's demands that the customers attest that they are not using Linux is economic suicide. Existing customers now face the prospect of being sued in an attempt to force the customer to acknowlege that SCO owns Linux. Potential customers face the prospect that signing a contract to buy SCO products dramatically increases the customer's chances of being sued by SCO. Such a strategy makes economic sense only if SCO has a way to make money from it. There is strong evidence that Microsoft has committed to paying SCO large amounts of money for SCO to attack Linux users in an attempt to force Linux out of the operating system marketplace. Microsoft has legally purchased a license to use SCO technology for somewhere between 10 million and 30 million dollars. Microsoft has absolutely no need to buy SCO technology licenses and the reasons Microsoft has given publicly are simply disinformation. http://news.com.com/2100-1016_3-1007528.html http://www.practical-tech.com/business/b05212003.htm So Microsoft has openly and legally given SCO money for reasons that Microsoft is unwilling to publicly reveal. B. Microsoft is willing to finance an expensive lawsuit campaign by SCO to bludgeon customers who use Linux. Mike Anderer is one of the participants in the Microsoft money laundering scheme. Here is his explanation of the purpose of Microsoft's support of SCO. "In a world where there are $500 million dollar patent infringement lawsuits imposed on OS companies (although this is not completely settled yet), how would somebody like Red Hat compete when 6 months ago they only had $80-$90 million in cash? At that point they could not even afford to settle a fraction of a single judgment without devastating their shareholders. I suspect Microsoft may have 50 or more of these lawsuits in the queue. All of them are not asking for hundreds of millions, but most would be large enough to ruin anything but the largest companies. Red Hat did recently raise several hundred million which certainly gives them more staying power. Ultimately, I do not think any company except a few of the largest companies can offer any reasonable insulation to their customers from these types of judgments. You would need a market cap of more than a couple billion to just survive in the OS space." http://trends.newsforge.com/trends/04/03/12/1731252.shtml C. SCO has sent letters to about 6000 SCO customers stating that SCO owns Linux and that the terms of the contract between SCO and each customer forbids the customer from using Linux unless the customer pays SCO for Linux. SCO demanded that each customer certify that they had not inserted any SCO code into Linux. SCO then sued one of their customers, DaimlerChrysler, because DaimlerChrysler did not reply to the letter. http://www.groklaw.net/article.php?story=20040303182714835 Such lawsuits against SCO's existing customers are a strong incentive for SCO's customers to stop doing business with SCO. This strategy of trying to extort money from existing customers by threatening to launch expensive lawsuits does not make any economic sense from SCO's viewpoint unless SCO has been promised large amounts of money by Microsoft for harassing companies that use Linux in line with the Microsoft strategy that Mike Anderer announced. SCO has also repeatedly threatened to sue Linux users who are not SCO customers. http://www.cxotoday.com/cxo/jsp/index.jsp?file=template0.jsp&storyid=472žion=News&subsection=Business&subsection_code=1 SCO has sued AutoZone for using Linux. http://news.com.com/2100-1014-5168921.html Coincidently, the Nevada court where SCO filed the Autozone lawsuit has infringed upon SCO's intellectual property rights to the exact same extent that Autozone has or has not infringed on SCO's intellectual property rights. http://www.linuxpipeline.com/trends/18201947 SCO markets Linux licenses as a way to avoid lawsuits. http://www.thescogroup.com/scosource/linuxlicense.html http://www.nwfusion.com/news/2003/0721sco.html http://news.com.com/2100-7344-5176308.html The SCO attempt to sell Linux licenses has all of the earmarks of an extortion racket. From a marketing viewpoint such an extortion campaign is economic suicide. No Linux user will pay SCO a Linux licensing fee based on SCO's extremely flimsy claims to owning Linux. This strategy of trying to extort money from Linux users by threatening to launch expensive lawsuits does not make any economic sense from SCO's viewpoint unless SCO has been promised large amounts of money by Microsoft for harassing companies that use or sell Linux in line with the Microsoft strategy that Mike Anderer announced. So I conclude that Microsoft has secretly and illegally invested money in SCO equity. No sophisticated investor would seriously consider buying equity in SCO's lawsuit campaign against Linux because the SCO lawsuit strategy is a guarenteed loss to SCO and its investors. Therefore any sophisticated investor would only be interested in investing in SCO if Microsoft compensated the investor for doing so. Any efforts by Microsoft and the nominal investors to hide the fact that money invested in SCO originated from Microsoft is illegal money laundering. D. BayStar and The Royal Bank of Canada invested in a private placement of SCO convertible preferred shares which amounts to 17.5% of SCO equity. http://www.forbes.com/markets/newswire/2003/10/16/rtr1112634.html http://marketwatch-cnet.com.com/2110-7344_3-5093997.html http://biz.yahoo.com/e/031017/scox8-k.html This is the contract between SCO and Royal Bank and BayStar. http://contracts.onecle.com/sco/baystar.reg.2003.10.16.shtml E. Royal Bank has stated that it purchased the equity position in SCO as a hedge against client positions. In fact Royal Bank purchased the SCO equity as a front for Microsoft or Microsoft's agents.. http://www.globetechnology.com/servlet/story/RTGAM.20031209.gtscodec9/BNStory/Technology/ In order for a hedge to work both sides of the hedge must be owned by the same investor. The article in the Globe and Mail quotes the Royal Bank as saying that Royal Bank made the SCO investment to hedge a client's position. If the client owns one side of the hedge and Royal Bank owns the offsetting position of the hedge then neither the client nor Royal Bank is hedged against anything. In order for the client to be hedged the client must own the SCO equity position. If the SCO equity position was purchased in Royal Bank's name but is beneficially owned by Royal Bank client then the client, and perhaps Royal Bank, has broken the United States securities law that requires any purchaser of a significant equity position to publicly announce their equity purchase and their reasons for the purchase. The purchaser must also file a form with the United States Securities Exchange Commission. quoted from the Globe and Mail: 'An RBC spokesman was reluctant to comment, saying the SEC filing was about how SCO operates its business. He said that RBC's "investment in SCO is passive, made to hedge an economic exposure resulting from client transactions."' In any case, the Royal Bank statement is nonsense meant to hide who really owns the SCO equity position. F. I suspect that the money laundry trail that leads from Microsoft to Royal Bank passes through McGill University in Montreal, Quebec, Canada. "Vulcan Inc. Paul G. Allen, co-founder of Microsoft" is listed as an "angel", i.e. someone who has given McGill University a lot of money, by McGill. http://www.mcgill.ca/ott/links/ The same McGill web site also lists Royal Bank Business Plans as a business plans site and Royal Bank Capital Corporation as a venture capital site. I sent a letter to McGill on April 10, 2004 asking the following two questions. 1. During 2003 what investments did McGill University make, other than short term money, where the investments were greater than one million dollars? 2. During 2003 what non-government grants, endowments, or other gifts did McGill University receive where the gifts were greater than one million dollars? McGill chose to ignore my letter. Therefore I recommend that the SEC go through the Canadian authorities to ask McGill the following two questions. 1. Did Paul Allen, Vulcan Capital, or anybody else donate $30,000,000 to McGill University's endowment, trust or other invested funds during the 2003 calendar year? 2. Has McGill University invested $30,000,000 in SCO through Royal Bank? G. BayStar is also a front for a secret Microsoft investment in SCO. Here is a leaked email from Michael Anderer of S2 Strategic Consulting to SCO which states that Microsoft provided the entire $50,000,000 which BayStar and Royal Bank invested in SCO: http://www.opensource.org/halloween/halloween10.html SCO has stated that the leaked email is genuine: http://www.eweek.com/article2/0,1759,1542904,00.asp Here is the contract between S2 Strategic Consulting and SCO. http://contracts.onecle.com/sco/s2.svc.2003.07.01.shtml SCO paid S2 Strategic Consulting Services by giving them a warrant to purchase 25,000 shares of SCO stock at a price of $8.50 per share. Therefore S2 Strategic Consulting Services did something useful for SCO. http://contracts.onecle.com/sco/s2.warrant.2003.07.01.shtml This article explains that Paul Allen, the second largest Microsoft shareholder, is also a large investor in BayStar: http://www.wired.com/news/business/0,1367,62544,00.html?tw=wn_tophead_2 Paul Allen makes most of his investments through Vulcan Capital: http://capital.vulcan.com/ "Lawrence Goldfarb, managing partner of BayStar, says that senior executives at the software giant had telephoned him about two months before the investment." http://www.businessweek.com/technology/content/mar2004/tc20040311_8915_tc119.htm After BayStar invested in SCO, BayStar began exerting extreme pressure on SCO to abandon SCO's business of selling Unix operating systems and concentrate on attacking Linux in the courts: http://www.nytimes.com/2004/04/22/technology/22sco.html?ex=1083211200&en=11aa704a6aaf373f&ei=5062&partner=GOOGLE SCO does not want to give up selling Unix or make the other changes demanded by BayStar. http://www.sltrib.com/2004/Apr/04252004/business/160190.asp BayStar's business plan for SCO is exactly what Microsoft, Paul Allen, and Vulcan Corp want SCO to do. It is in Microsoft's best interest for SCO to stop selling System V which is a competing operating system to Microsoft's Windows operating system. It is in Microsoft's best interest to intimidate software customers to not use Linux. However such a plan is disasterous for SCO's very viability as a business. This pressure from BayStar indicates that BayStar is primarily interested in SCO advancing Microsoft's interests even at the expense of SCO's, and presumably BayStar's, best interests. Therefore I conclude that Microsoft has illegal hidden control of the BayStar investment in SCO and illegally laundered the money used to invest in SCO.
3. BayStar, Boies, Schiller, and Flexner, Microsoft, Royal Bank, SCO management, and Vulcan Capital are engaged in insider dealing to the detriment of the outside SCO shareholders. A. SCO entered into an agreement with the law firm Boies, Schiller, and Flexner where Boies will receive 20% of the value of any new equity issued by SCO. http://www.sec.gov/Archives/edgar/data/1102542/000110465903028046/a03-6084_1ex99d1.htm http://www.groklaw.net/article.php?story=20031209210141826 B. Under the terms of that agreement SCO paid Boies, Schiller, and Flexner $10 million consisting of $1 million in cash and nominally $9 million in SCO stock as being 20% of the private equity placement to BayStar and Royal Bank. http://www.crn.com/sections/BreakingNews/dailyarchives.asp?ArticleID=46124 C. BayStar and Royal Bank have objected to the terms of the agreement between SCO and Boies, Schiller, and Flexner. The four parties have negotiated a new agreement dividing up the results of future SCO equity sales among BayStar, Boies, Schiller, and Flexner, Royal Bank, and SCO. http://www.globetechnology.com/servlet/story/RTGAM.20031209.gtscodec9/BNStory/Technology/ http://www.sec.gov/Archives/edgar/data/1102542/000110465903028046/a03-6084_18k.htm D. If, as Royal Bank stated in the Globe and Mail, the Royal Bank investment is passive then why is Royal Bank so actively trying to manage SCO equity sales strategy? It is against U.S. law for a bank to manage a corporation. E. This negotiation and resulting agreement is illegal insider dealing. Whether SCO equity growth results from SCO successfully stealing other people's operating systems, being a Microsoft mercenary, or from a pump and dump stock scam the resulting profit will be distributed according to an insider deal among BayStar, Boies, Schiller, and Flexner, Royal Bank, and SCO management to the detriment of the outside shareholders. F. Since BayStar and/or Royal Bank are fronts for Microsoft and/or Vulcan Capital who actually owns a 17.5% interest in SCO then Microsoft and/or Vulcan Capital is also guilty of insider dealing. G. On April 16, 2004 the deal among BayStar, Boies Schiller & Flexner, Royal Bank, and SCO began to unravel. All parties involved were extremely vague as to what the problem was. http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=109&STORY=/www/story/04-16-2004/0002153221&EDATE= On May 7, 2004 Royal Bank announced that it had sold 20,000 of its SCO Series 1-A preferred stock to BayStar. Royal Bank converted its remaining 10,000 Series 1-A preferred shares into SCO common stock at a conversion price of $13.50 per common share. This leaves Royal Bank owning 740,740 shares of SCO common stock which amounts to 4.8% of the outstanding SCO common stock. Thus Royal Bank ownership in SCO drops below the 5% threshold for reporting the name of real owner of the position, although this action does not relieve Royal Bank of its responsibility to report who beneficially owned the equity position before May 7. http://ir.sco.com/ReleaseDetail.cfm?ReleaseID=134782 H. By buying 20,000 shares of SCO Series 1-A preferred stock from Royal Bank, Baystar moves from owning 40% of the Series 1-A preferred stock to owning 100% of the Series 1-A preferred stock. According to the illegal insider deal described in section 3.F. "SCO is prohibited from completing any settlement, acquisition of SCO or investment in SCO, unless the holders of two-thirds of the preferred shares give written approval." "Previously, when RBC held 60 percent of the preferred shares, and BayStar had 40 percent, neither party had more than two-thirds. Now, BayStar holds all the preferred shares." http://news.zdnet.co.uk/software/linuxunix/0,39020390,39154226,00.htm I. SCO cannot exist without more capital infusions. Thus Microsoft has arrived at the position of illegal hidden control of SCO by having acquired veto power over new investment in SCO. Such hidden control was obtained by illegal money laundering and illegal insider dealing. Microsoft intends to use their control of SCO to illegally destroy System V as a competitor to Microsoft software and to run a protection racket designed to drive Linux from the software market where it has begun successfully competing with Microsoft products.
4. The SCO Group has illegally manipulated the price of their common stock. I am asking the Securities and Exchange Commission to examine every trade made in SCO stock during the time period of March 29 through April 7 to see if SCO was manipulating the SCO stock price, making wash trades, and marking the close. If such illegal trades were made then both SCO and the broker who made the trades for SCO have broken the law. A. On March 10, 2004 SCO filed a report with the SEC stating that SCO intended to repurchase SCO common stock. http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1047469-04-7411&SID=04-00 SCO also issued a press release announcing the SCO stock repurchase plan. http://ir.sco.com/ReleaseDetail.cfm?ReleaseID=130784 SCO investing in their own, presumably undervalued, stock is legal. Stock market price manipulation is illegal. I think that during the time period of March 29 through April 7, 2004 SCO illegally manipulated its stock price in an attempt to create higher prices for their stock. B. Between March 29 and April 7 "time and sales" shows there were frequent sequences of 100 share lots bought at about 10 minute intervals on constant upticks. It is unlikely that random small investor purchases would occur with such regularity. A large investor would not buy in such a large number of small lots because commission costs would balloon. Even more suspiciously, time and sales shows several final daily purchases on the Pacific Exchange where the final transaction was a 100 share lot purchased on a large uptick. Such transactions are called "marking the close" and marking the close is illegal. In the OPINION OF THE COMMISSION in the matter of Richard D. Chema the Commission stated: "In addition to his wash trades, Broumas engaged in the practice of "marking the close" by purchasing small amounts of JML on the AMEX and the Midwest Stock Exchange at or near the close of trading.  Between January 18, 1989 and June 25, 1990, he made 69 purchases of JML during the final 10 minutes of the trading day. Of those purchases, 54 were the last trade of the day and 47 were executed on an uptick.  On several occasions, Broumas' trades raised the closing price of JML stock by 1/8. Broumas' purchases at the close of trading were beneficial to him in more than one respect. Brokerage firms use the closing price of a security in determining whether they will extend margin on the security, whether a customer's account meets margin requirements, and the customer's equity in his margin account. Moreover, the closing price of a security is quoted in the following day's newspapers. Broumas admitted to one of his registered representatives that he was trying to create interest in JML, observing that "if nobody [bought] it on a certain day, it [wouldn't] show up in the [newspaper] listing." " http://www.sec.gov/litigation/opinions/3440719.txt On and before March 29 there was a huge short interest in SCO stock. In addition to the advantages to SCO for marking the close given in the case I just cited, marking the close helped SCO to squeeze the shorts by increasing the shorts margin requirements. Another advantage to SCO of marking the close is that the closing price of SCO stock sets the conversion price of SCO Series A-1 Convertible Preferred Stock under the agreement between SCO and BayStar and Royal Bank. http://www.edgar-online.com/bin/edgardoc/finSys_main.asp?dcn=0001104659-04-002999&nad= So it is illegal for SCO to engage in marking the close for SCO stock. C. SCO stock is not widely followed by stock market analysts because of its small market volume. One person who has followed SCO for some time is Dion Cornett, a Decatur Jones analyst, who since January has been recommending that investors short SCO stock. Dion Cornett has a target price of $2 per share for SCO stock. http://biz.yahoo.com/ibd/040402/tech_1.html If SCO were investing in their own stock because it was grossly undervalued then SCO should purchase their stock at prices well below $2 a share. The fact that SCO is purchasing their stock in the $8.50 to $9.50 range indicates an attempt at stock price manipulation rather than investment. This is not a closed end mutual fund buying back their own common stock that is trading at well under net asset value. This is a pump and dump stock scam trying to raise the price of its stock to prolong the bubble. http://bigcharts.com/custom/washingtontimes-com/interactivechart.asp?sid=&o_symb=scox&symb=scox&x=0&y=0&time=9&uf=7168&compidx=aaaaa%3A0 D. SCO has made wash trades. SCO is in poor financial shape: http://ir.sco.com/ReleaseDetail.cfm?ReleaseID=129977 Which creates a problem for SCO as to how to pay for all of the stock that it might have to buy to raise the stock price. One way that SCO can prolong the time that it can support its stock price is by engaging in "wash trades". Wash trades are where SCO acts simultaneously as the buyer and seller thus creating the appearance of a 100 share trade on an uptick at at no cost to SCO other than the commission cost. One way that the SEC can check for SCO wash trades on the NASDAQ is to check to see if SCO made any trades where SCO told their broker to execute the trade with a particular NASDAQ dealer. Such a stipulation to a broker is a red flag for a wash trade or other illegal trade. SCO is thinly traded enough that a series of 100 share wash trades on continuous upticks could raise the price of SCO stock. On April 7 a SCO insider, Thomas Raimondi, sold 11,481 shares of SCO for $128,736.45. http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-04-12&SID=04-00 On April 7 a SCO insider, Jeff Hunsaker, sold 264,155 shares of SCO for $3,137,536.59. http://ir.sco.com/EdgarDetail.cfm?CompanyID=CALD&CIK=1102542&FID=1102542-04-14&SID=04-00 These two trades are illegal wash sales. SCO cannot be buying up its stock at the same time that SCO insiders are selling SCO stock. E. SCO may have illegally supported the SCO stock price. http://bigcharts.com/custom/washingtontimes-com/interactivechart.asp?sid=&o_symb=scox&symb=scox&x=0&y=0&time=8&uf=7168&compidx=aaaaa%3A0 Looking at the SCOX stock chart shown above it appears that about April 20 SCOX was likely due for a rally back up to the $8 support/resistance level driven by short covering. There are 8 SEC Statement of Changes of Beneficial Ownership filings dated 04/22/2004. I suggest that the SEC investigate whether SCO bought stock on April 21 and/or April 22, 2004 to trigger the expected short covering rally. If SCO did so then SCO was engaged in illegal stock price manipulation in an effort to support the SCO stock price above the exercise price of the 8 newly issued insider stock options.
5. SCO has illegally manipulated its insider stock option plan. In order to balance the conflicting interests of the inside and outside shareholders in a corporation it is customary when granting stock options based on stock market prices to use the average closing price for some time period previous to the date that the option was issued. The usual averaging period is 30 days. But SCO has used an entirely different method of setting the exercise price for the stock options issued to SCO insiders from March 6, 2003 through April 23, 2004. SCO has been back dating the date that stock options are granted and then using the closing price on the transaction date as the exercise price for the stock option. In fairness to the outside shareholders the stock options should have been granted at the 30 day average closing price on the issue date. This fraud has resulted in 31 of the 32 stock options issued since March 6, 2003 being issued at exercise prices very advantageous to the SCO insiders and very disadvantageous to SCO outside shareholders. The SCO stock option reports filed with the SEC can be found here. http://ir.sco.com/edgar.cfm The daily stock prices for SCOX can be found here. http://finance.yahoo.com/q/hp?s=SCOX The following list shows each stock option issued, the issue date, the back dated transaction date, the 30 day closing price average on the issue date, the closing price on the transaction date, and the exercise price of the option. I then calculate the insider advantage amount by subtracting the exercise price from the 30 day average and multiplying by the number of shares. Insiders Stock Options Exercise Advantage Prices ------------------------- Date Name Shares 30 Day Close Exercise issued 03/27/2003 $2.36 $2.27 03/18/2003 Robert Bench 100,000 $2.07 $2.07 unfair insider advantage: $29,000 issued 03/27/2003 $2.36 $2.27 03/18/2003 Reginald Broughton 50,000 $2.07 $2.07 unfair insider advantage: $14,500 issued 03/27/2003 $2.36 $2.27 03/18/2003 Michael Olson 50,000 $2.07 $2.07 unfair insider advantage: $14,500 issued 03/27/2003 $2.36 $2.27 03/18/2003 Darl McBride 200,000 $2.07 $2.07 unfair insider advantage: $58,000 issued 06/09/2003 $6.03 $9.05 03/18/2003 Jeff Hunsaker 100,000 $2.07 $2.07 unfair insider advantage: $396,000 issued 07/08/2003 $10.60 $11.01 06/26/2003 Fred Skousen 45,000 $10.25 $10.25 unfair insider advantage: $15,750 issued 07/24/2003 $10.56 $14.84 05/16/2003 Ralph Yarrow 10,000 $4.75 $4.75 unfair insider advantage: $58,100 issued 07/24/2003 $10.56 $14.84 05/16/2003 Duff Thompson 10,000 $4.75 $4.75 unfair insider advantage: $58,100 issued 07/24/2003 $10.56 $14.84 05/16/2003 Darcy Mott 10,000 $4.75 $4.75 unfair insider advantage: $58,100 issued 07/24/2003 $10.56 $14.84 05/16/2003 Steven Cakebread 10,000 $4.75 $4.75 unfair insider advantage: $58,100 issued 07/24/2003 $10.56 $14.84 05/16/2003 Edward Iacobucci 10,000 $4.75 $4.75 unfair insider advantage: $58,100 issued 07/24/2003 $10.56 $14.84 06/02/2003 Thomas Raimondi 10,000 $6.13 $6.13 unfair insider advantage: $44,300 issued 09/12/2003 $13.61 $17.99 09/11/2003 Ryan Tibbits 30,000 $17.99 $8.71 unfair insider advantage: $147,000 issued 09/12/2003 $13.61 $17.99 09/11/2003 Ryan Tibbits 35,000 $17.99 $17.99 insider disadvantage: $153,300- issued 11/03/2003 $16.87 $16.90 11/03/2003 Daniel Campbell 45,000 $15.99 $15.99 unfair insider advantage: $39,600 issued 12/12/2003 $15.59 $15.99 06/02/2003 Thomas Raimondi 15,000 $6.13 $6.13 unfair insider advantage: $141,900 issued 12/12/2003 $15.59 $15.99 05/16/2003 Steven Cakebread 15,000 $4.75 $4.75 unfair insider advantage: $162,600 issued 12/12/2003 $15.59 $15.99 05/16/2003 Darcy Mott 15,000 $4.75 $4.75 unfair insider advantage: $162,600 issued 12/12/2003 $15.59 $15.99 05/16/2003 Ralph Yarrow 15,000 $4.75 $4.75 unfair insider advantage: $162,600 issued 12/12/2003 $15.59 $15.99 05/16/2003 Duff Thompson 15,000 $4.75 $4.75 unfair insider advantage: $162,600 issued 12/12/2003 $15.59 $15.99 05/16/2003 Edward Iacobucci 15,000 $4.75 $4.75 unfair insider advantage: $162,600 issued 12/15/2003 $15.85 $16.02 06/13/2003 Christopher Sontag 5,739 $11.21 $0.001 unfair insider advantage: $85,252 issued 01/30/2004 $16.37 $14.85 05/16/2003 Ralph Yarrow 15,000 $4.75 $4.75 unfair insider advantage: $174,300 issued 02/03/2004 $16.07 $14.40 05/16/2003 Darcy Mott 15,000 $4.75 $4.75 unfair insider advantage: $169,800 issued 04/22/2004 $9.02 $6.08 04/20/2004 Thomas Raimondi 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Edward Iacobucci 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Daniel Campbell 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Darcy Mott 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Ralph Yarrow 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Fred Skousen 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Duff Thompson 15,000 $7.18 $7.18 unfair insider advantage: $27,600 issued 04/22/2004 $9.02 $6.08 04/20/2004 Bert Young 150,000 $7.18 $7.18 unfair insider advantage: $276,000 ---------------------------------------- total unfair insider advantage: $2,749,302
------------------------------------ BayStar: BayStar Capital LP 50 California Street San Francisco, California 94111 U.S.A. ------------------------------------ Boies, Schiller, and Flexner: Boies Schiller & Flexner 570 Lexington Avenue New York, New York 10022 U.S.A. ------------------------------------ Jeff F Hunsaker 355 S 520 W, Suite 100 Lindon, Utah 84042 U.S.A. ------------------------------------ Microsoft Microsoft Corporation One Microsoft Way Redmond, WA 98052-6399 U.S.A ------------------------------------ Thomas P. Raimondi jr 1801 S. Federal Highway, Suite 100 Delrae Beach, Florida 33483 U.S.A. ------------------------------------ Royal Bank: Royal Bank of Canada 200 Bay Street Toronto, Ontario M5J 2J5 Canada ------------------------------------ SCO: The SCO Group, Inc. 355 South 520 West Lindon, Utah 84042 U.S.A. ------------------------------------ Vulcan Capital Vulcan Capital 505 Fifth Avenue South Suite 900 Seattle, Washington 98104 U.S.A. ------------------------------------ Sincerely, Steve Stites 2933 Marshall Street Falls Church, Virginia 22042 U.S.A.