Bitter struggle to control company
Canopy: Executives face off against founder Noorda and his family in a $100M court action
By Bob Mims
The Salt Lake Tribune
January 29, 2005
A bitter struggle for control of The Canopy Group has erupted in dueling allegations of greed, deceit and manipulation of its aged and purportedly failing founder, Utah technology legend Ray Noorda.
On one side is Ralph Yarro, ousted chairman, president and chief executive of the Lindon-based Canopy, an investment firm whose extensive holdings include SCO Group, a company now widely known for its Linux-related lawsuits against IBM and others. Yarro is joined by ex-chief financial officer Darcy Mott and former corporate counsel Brent Christensen.
The three are suing for at least $100 million, alleging they were illegally ousted in December by a group led by Noorda's daughter, Val Noorda Kriedel of Orange County, Calif.; longtime Canopy investment adviser Terry Peterson, and William Mustard, an independent senior executive consultant appointed CEO in Yarro's place.
Meantime, Canopy has countersued, along with Ray Noorda and wife, Lewena, as officers of the Noorda Family Trust, Canopy's founding and primary investor. They accuse Yarro, Mott and Christensen of siphoning off at least $20 million via "a series of self-dealing and wasteful transactions."
Yarro attorney Stanley Preston insists the board approved - and in several cases Noorda personally signed - all compensation challenged by Canopy.
In competing lawsuits filed in Provo's 4th District Court, both sides allege the other took advantage of the elderly Noordas.
Canopy attorney David B. Watkiss declined Friday to discuss Ray Noorda's current mental acuity. However, the lawsuit he filed acknowledges that, "consequences of age and associated health issues" had limited Ray Noorda's involvement in Canopy affairs for the past six years.
"As the Noordas aged . . . [they] increasingly relied on and deferred to Yarro's counsel and advice in all matters relating to Canopy," the company's suit states. Ray Noorda is 80 and Lewena Noorda is 81.
Canopy charges that Yarro used his longtime friendship with Ray Noorda to assume effective control of Canopy and its finances. Noorda was Yarro's mentor dating back to the early 1990s when Noorda - hailed as the father of network computing - ran Novell and employed Yarro.
Yarro's lawsuit states he had worked with Noorda guiding Canopy since 1995, and that Noorda had repeatedly made it clear he did not want his children involved in the venture capital firm that also holds interests in Altiris Inc., FatPipe Networks and Linux Networx.
Yarro's suit further contends that from 2003 on, Ray Noorda's "memory and health deteriorated to the extent that he became incapacitated and/or subject to undue influences."
Yarro contends it was during this period that Val Noorda Kriedel, rebuffed in her Canopy-related inquiries by Yarro, joined with Peterson - who was allegedly upset over diminished control of Canopy-related investments -and Mustard in a campaign to "disparage" Yarro, Mott and Christensen and "exercise undue influence" over the Noordas.
A Canopy board meeting was called Dec. 17, but according to Yarro, the Noordas did not personally attend.
Instead, Yarro was met by attorneys who informed him the Noordas would participate by speaker phone from another location.
Allegedly reading from a script, Lewena Noorda moved for termination of Yarro, Mott and Christensen and appointment of Mustard as CEO. A purportedly prompted Ray Noorda seconded, providing the needed 2-1 majority.
Yarro told The Salt Lake Tribune Friday that, "based on our long and close association, as well as the long-standing mutual trust and respect between us and Mr. Noorda over many years, we do not believe that the actions taken on Dec. 17 reflect the mind and will of Ray Noorda."
In addition to monetary damages, Yarro's suit seeks a court declaration that the board meeting and its results are invalid, and that Yarro, Mott and Christensen regain their positions; removal of the Noordas from the three-member board; and appointment of a neutral overseer for Canopy until litigation is resolved.
The Canopy suit, meanwhile, adds to its damage demands the voiding of Yarro's, Mott's and Christensen's stock options; and removal of Yarro from the company board.
No hearings have been set for either suit. Both have been assigned to Judge Anthony Scofield.
Efforts to reach the Noordas, Peterson and Mustard were unsuccessful. However, Watkiss did confirm Yarro, Mott and Christensen were notified they had been fired for cause, the reasons echoing those later laid out in Canopy's lawsuit.
Other than stating charity, not the Noorda children, stand to eventually benefit from the family trust, Watkiss declined to discuss the state of the elder Noordas' relations with their offspring.
"We strongly believe the allegations in our complaint have merit and we look forward to the opportunity to prove those allegations," Watkiss said.
Yarro, too, is confident, though emphasizing the decision to sue was a painful one.
"We would not have filed this lawsuit if we thought there was any other way to resolve this matter and to preserve Canopy, its related companies and the jobs of many people," he said.