
Ask HN: Screwed out of $12.8 million. Being Extorted.  No Money for attorneys. - downandout
Hi Everyone,<p>In 2004, I co-founded an Internet security company called Anakam.  I was a programmer with some interesting ideas, and my business partner and I agreed at the time that I would receive 20%, and my partner 80% (he was financing the whole thing).  We had a personal falling out in early 2005, and I left the company, always believing that my ownership was still intact.  In October 2010, the company was sold for $64 million to Equifax.  I found out about the sale after the fact; my partner had simply pretended that I never existed and had assumed my ownership.  I am listed as the inventor on the company's first patent, which is still a key part of the company's product offerings today.<p>In February 2011, I sent a cease-and-desist letter to Equifax.  They sent back a letter saying that they viewed my letter as an extortion attempt, and that if I did not immediately sign a settlement and and NDA that were included with their letter (without compensation), they would file a criminal complaint against me. After this, I showed my cease-and-desist letter to an attorney, who assured me that my letter was well within the law, but that their response was in fact extortion. There is a specific federal law that prohibits threatening to accuse someone of a crime unless they give you some form of consideration - in this case the outright dismissal of $12.8 million in claims. Their response came entirely out of left field, and I have not heard from them since the moment the attorney I showed the letter to told them that he believed their response was a violation of Federal extortion laws.  The letter was signed by my former business partner, who was at the time still the CEO of the Anakam division of Equifax, and was, oddly enough, forwarded to me from their law firm.<p>I do not have the resources to pursue this matter at this time.  I am told that I could have those involved in authoring and delivering the extortion letter prosecuted criminally (possibly including Equifax itself), but I have little interest in that right now.<p>Does anyone have any suggestions as to what I can/should do in this situation? I have come to the realization that I may never see my $12.8 million, but the extortion really added insult to injury.  Any suggestions would be helpful.<p>You can email rr@guiyui.com if you would prefer not to post in public.
======
gizmo
You're the bad guy in this story, and it isn't even close.

At the point you and your partner had a falling out you had put in less than a
year of work for the company. The other partner had invested, I can only
assume, a substantial amount of money. If at that point he too had quit the
company (and the shares) would have been worth absolutely nothing. I repeat:
when you quit your shares were worth nothing. You could easily walk away
because it wasn't your money on the line. You left the other guy in a terrible
spot where he invested a bunch of money and his (technical?) partner left.

Now, the other guy spends an additional 6 years on the business and turns it
into a success and now you believe you're entitled to that even though you
screwed him over 6 years ago? Even though the ONLY reason that the shares are
worth something now is because your partner put the effort in! That you're
entitled to the same equity you would have gotten had you stayed for all 7
years? Are you kidding me? And you're publicly accusing the ex-CEO of Anakam
of screwing _you_ out of $12.8 million? It's clearly the other way around.
You're trying to screw the other guy out of his money AGAIN, based on some
dodgy legal footing.

~~~
lrm242
What would you say if this person's technology contribution was fundamental to
the success of the company and, once complete, the other partner then did away
with the technical mind behind the product so as to maximize benefit for
himself? You have no idea what the true and complete facts are behind this
guys story. Stop running around trying to apply half-baked, two-bit Valley
Web-startup rules to his situation.

~~~
gizmo
I base my judgement on the information I have at my disposal. If the facts
change my judgement will change accordingly. I could refuse to pass judgement
until I have "the complete and true facts" (as if that's even possible). I
could wisely shake my head and say "well, it's complicated", "there are always
shades of gray", "people ought to be adult about these matters".

Refusal to take a side is just
<http://lesswrong.com/lw/yp/pretending_to_be_wise/>.

Based on the post by the OP I consider the claim that he is entitled to $12.8
million ludicrous, and I stand by that.

~~~
snth
I don't think the point of that post was "You should always take a side, no
matter how little information you have".

------
brador
Step 1: Get your paperwork in order. Find the papers that were signed,
certificates given, emails sent. Gather ALL your evidence in one place/folder.
MAKE A PHOTOCOPY OF EVERYTHING. Keep this separate just in case things go
missing.

Step 2: Build your story. Get it clear in your own mind what happened and how
you got screwed.

Step 3: Talk to the best attorney(s) you can find. Talk fast, listen well.

Step 4: Let them do what they do.

If your case is solid, most attorneys will take it on contingency, but at 12.8
mil this isn't a small town matter. You're looking at semi-pro minimum.
Consider it an investment.

~~~
ArbitraryLimits
_Semi_ -pro? How much money would it take for you to require a full pro?

~~~
PakG1
Try $800/hour. Or maybe even higher. Grade A lawyers are in that realm, I know
people who charge that much, and have founder friends who have lawyers that
charge that much.

edit: which is why contingency is so important here.

~~~
ArbitraryLimits
I meant how much money you would call in pro lawyers to get, not how much you
would pay them.

~~~
PakG1
See now I misread you. :)

------
bm98
You clearly aren't trying to be anonymous, since you named the company and
your patent is easy to find. Congratulations, I guess, for being the first to
patent the idea of authenticating a web app based on a password plus a cookie
from a prior session, and requiring additional authentication if the cookie
isn't there. Hard to imagine that that wasn't obvious in 2004, but maybe it
just seems that way in retrospect.

~~~
smoyer
I believe the bank where I have my savings account is using this IP for their
login system ... I don't know whether Equifax provides it or not. I guess the
other question is whether this can be invalidated by prior art. It also seems
obvious and common to me but I can't say whether it was in 2004 either.

------
apinstein
I went through a similar situation myself a long time ago, albeit for much
less money.

1\. Put your story together, with paperwork and references. 2\. Call some
attorneys about taking the case on contingency. You have to "sell" them on the
value of your case. Think of it like pitching an investor, because frankly
that's what you're doing. 2a. Don't pay a retainer. I blew a lot of money with
this route before focusing on a contingency arrangement. 2b. I got myself a
free Westlaw trial account and searched for cases similar to mine, figuring I
could find someone for whom my case wouldn't be risky for them. Also I looked
for small firms so that I could talk directly to the decision maker about
taking cases on contingency.

Result? 0 money invested, reasonable settlement, and closure. It took about a
year. Yours will take longer likely.

------
Duff
You need to stop posting about this on the internet and get some competent
advice.

If you actually have $12.8M + potential damages at stake, saying "I cannot
afford a lawyer" is ridiculous.

~~~
ohyes
Yup. Posting on the internet can hurt your case. Although this is interesting,
I'd honestly recommend discontinuing the thread and deleting the post.

A lawyer that thinks you have a good case will take this up for a cut of the
settlement no problem. If you can't find a lawyer that thinks you have a good
case... it probably isn't worth suing.

------
GiraffeNecktie
Equifax is a huge corporation which is both good and bad. Bad because they've
got limitless resources, good because they are a publicly traded corporation
which makes them sensitive to valid lawsuits. Their business is also based on
validating trustworthiness, which I think would also make them vulnerable to
allegations of criminality and abuse of process. This is not a job for your
typical small town lawyer. I think you need to do some research and find a
big-ass New York-based law firm that knows how to find their short hairs and
pull sharply.

~~~
smoyer
They're also likely to have other large public corporations as clients using
your technology ... an injunction against using your technology until the case
is settled could prove extremely embarrassing and costly to them.

------
joshuaheard
I practice business litigation in Texas and California. It sounds like you
have a great case. See if you can find an attorney who will take this on a
contingency basis.

What state are you in? I can forward this to a California attorney I know who
does business litigation on a contingency basis if you are in California,
since I am living in Texas at the moment.

~~~
downandout
I am in Nevada, but any litigation would likely take place in California. The
company was initially based in Nevada, but was moved to San Diego (the
Southern District of California for a federal matter). After the acquisition I
believe their headquarters moved to Virginia, but I know they still have an
office in San Diego.

~~~
joelhaus
Just listened to the latest Digital Age podcast and they discuss litigation
funding, which sounds like exactly what you need:

<http://www.youtube.com/watch?v=gdXO2WgKazM>

They answer some interesting questions about the process and there are
obviously some advantages over a contingency arrangement (e.g. counsel gets
compensation and thereby incentive to prosecute your case with all of the
necessary resources). Here is the description of this program:

    
    
      The cost of litigation can be catastrophic. Many litigants drop
      good cases, or lose their businesses entirely, because they
      run out of money. Recently, third parties have appeared to
      advance legal costs, in exchange for a piece of the recovery.
      But is this new structure illegal? Litigation funder Selvyn
      Seidel tells Jim Zirin how funding has transformed the global
      marketplace.

------
VanL
A number of sizable and well-respected law firms will take your case on
contingency if they believe that it is a good enough case and you can win.
Upside is that you can get good lawyers able to help you, and if you lose, you
won't be out the lawyer's fees. Downside is that if you win, you will pay a
substantial percentage (30-50%) in fees, largely due to the increased risk
that the firm takes on.

Also, whoever said to sue for IP infringement may be worth listening to. 12.5M
for a patent judgment is low.

------
saalweachter
I suspect you are overestimating what you are entitled to.

20% of the founding equity rarely turns into 20% of the final sale price of
the company. Normal, healthy subsequent investment could easily dilute the
founding shares 2:1 or 3:1. If the company goes through especially bad times
-- a near bankruptcy followed by a last-minute bailout by investors, not
unheard of in the last few years -- the founding shares could easily be
diluted 10:1.

Add in a modest management carve-out from the sale, and your 20% amounts to
2-5% of 90% of $64 million, or $1.2-$2.9 million.

~~~
downandout
You are probably correct that there has been some dilution. My co-founder
already had very deep pockets before we started the company, and I believe
that he remained the primary investor throughout (though I am aware of 1 small
round participated in by a venture firm). He would have made it a priority to
dilute me out of existence.

They have refused to provide any information with regard to this at all.

~~~
SemanticFog
There are so many ways to screw over a non-employee, minority common
shareholder, you may well have no case here.

For example, if the company hit a rough patch, it might have been
recapitalized, with all current shareholders wiped out. Since your partner had
80% of the shares, and plenty of cash, he could have easily pulled this off.

Depending on what state you're in, you may no longer have any right to seek
redress. If your partner knows what he's doing (or has a lawyer who does), the
best you're going to get is a small amount of cash to go away. And if you guys
are on bad terms, you may not even get that.

~~~
michaelrwolfe
You can only dilute someone who owns shares.

I haven't seen any evidence here that he even owns any shares.

------
kanamekun
The first thing I would do is remove all references here to the names of the
companies involved.

You can still get the benefit of Hacker News advice while keeping the parties
anonymous... but by naming everyone, you open up several cans of worms (they
could sue you for defamation, they could learn how you're thinking about this
and what your resources are, this could get posted to TechCrunch in a way that
hurts your chances of a settlement, etc.).

------
davidw
1) Do you have documentation regarding the 20% ?

2) Sounds like you should seek an attorney who would be willing to take a cut
if they win the case.

~~~
downandout
I do have documentation regarding the 20%. The one attorney I have spoken to
says, for reasons I still don't entirely understand, that I have a better shot
at trying to sue them for using my intellectual property without permission,
since it is quite clear that I wasn't compensated as agreed for the license to
use the technology.

They also say that a civil extortion claim is the low-hanging fruit in this
situation, but this particular attorney was unwilling to take it on
contingency.

~~~
petercooper
_The one attorney I have spoken to says, for reasons I still don't entirely
understand, that I have a better shot at trying to sue them for using my
intellectual property without permission_

If I had to guess from your wording and this response, the "company" wasn't
incorporated while you were involved with it? If it were, you'd have some sort
of share certificate and the sale of the company may have been fraudulent. If
you're a shareholder, someone else can't easily just "assume [your]
ownership".

I'm guessing you never got an official 20% share of the corporation that was
eventually sold, so your attorney may be thinking your beef is with the guy
who "stole" your share and that could be a more complicated/less lucrative
case.

~~~
downandout
Well, there were several corporate machinations. Initially, the company was an
LLC, and I was given a 20% interest in it in writing. At some point after I
left, during one of the financing rounds, it became a corporation. The
corporation was sold.

~~~
jpdoctor
> At some point after I left, during one of the financing rounds, it became a
> corporation. The corporation was sold.

At what happened to your shares at that point?

If I'm reading between the lines of your lawyer, your shares were wiped out at
the time of sale? I've heard of this happening often (dilution of the common
happens frequently before an IPO, for example. You can see it in the S-1s.)

~~~
saalweachter
As someone who is not a lawyer, I feel like investigating what happened to
that original company is the best angle to work.

Your legal rights stem from the LLC; whatever you are entitled to will depend
on the exact fate of that company.

------
bond
I'm sure you can find a lawyer who can take the case on contingency, 10-20%
for the lawyer would make a nice sum...

~~~
wglb
Often it is more like 35% or 40%. And if there is an appeal they may go to
50%.

------
alain94040
Talk to as many attorneys as you can until you find a good one who is willing
to help.

Or treat this as an investment: invest $100K for a $10M return.

My personal recommendation: talk to great lawyers, they are more expensive on
a per-hour basis, but when they tell opposing counsel what they think of the
case, the other side usually listens. Been there, done that :-(

------
gojomo
Elsewhere in this thread you say, "the one attorney I have spoken to".

You need to speak to many attorneys. You essentially get a free 30-60 minute
consultation with each attorney just by shopping around. You'll get more value
out of it if you have your documentation and written timeline of events ready
before the discussion. But also, you might need to talk to a few before you
even realize what are the important documents and events to summarize.

Attorneys are wildly different in their competence and style and willingness
to work on contingency. Each may prefer a completely different approach to the
case. But almost any of them will be better able to craft a 'cease and
desist', or other demand letter, than what you did yourself (and may have
prompted the counter-threat via clumsy amateur language).

If you have a real case, and the stakes are as you describe, there are a lot
of better places you can get legal advice than a discussion thread. Don't DIY
legal notices against a giant corporation, don't improvise, don't litigate in
public, don't ask amateurs for help – shop around with professionals. You
could talk to dozens to lawyers, learn something new from each one, for no
money out-of-pocket.

------
AngeloAnolin
Any company being sold to another company requires due diligence, especially
on the legal side of matters. Equifax may have done their part in ensuring
that the business they are acquiring is all good and the ownership / stakes in
the company are all relevant (literally means as well that they ensured no
other claimants would suddenly come up after the acquisition).

I believe the focus of your case (should it materialize) would be to your
previous business partner. If you say and rightfully claim that there's a
documented agreement (filed during the company incorporation) that you own 20%
of the company, then there's a pretty good chance you may be able to get what
is rightfully yours. Take note that you should be clear whether that 20-80
agreement you made before pertains to the _ownership_ of the company, and not
on particular income with which the company would be generating.

Good luck on your case and may you get what is rightfully and legally yours,
so to speak.

------
michaelrwolfe
This is quite straightforward. You either own stock in the company or you
don't.

You own stock in the company if you received shares when you founded it and/or
if you received options, vested them, then exercised the shares upon leaving
the company.

If you own shares, you produce the certificates, and the acquirer will buy
them from you.

If you don't, you don't.

No attorney can help you if you claim to own shares in a company without
actually owning any shares.

The discussion about what you "deserve" and "don't deserve" is irrelevant. You
either own the shares or you do not own the shares.

------
Permit
I don't understand why you thought you could quit the whole company and still
retain 100% of your assets, then come back 7 whole years later and complain
that you were no longer an owner.

------
m4cl4rk
Here's a thought: Let it go. If your inspiration is the innovation at the
heart of useful, life-changing technology, count yourself fortunate to have
had such a meaningful impact.

Or dig in and fight like hell.

Roll up your sleeves and head to the nearest university's law library, bring
some reading glasses and a tablet, dig into the germaine presiding legal code,
and craft your offensive with the same fire in your belly that Erin Brokovich
did when she went after the gas company.

As a matter of fact, if it's true and you find that your legal footing is
indeed sound, it's a gold mine of content. Blog, book, movie. Think about it:
Equifax. You couldn't pick a better black hat for a David v Goliath/ Good v
Evil story. Really. The potential for intrigue and creative spin is endless.
Creative non-fiction, as a genre, is one of the most lucrative in the history
of story telling, publishing, theater, and film. And this story is one with an
increasingly transcendent resonance at the dawn of the so-called
'contract/freelance/entrepreneur economy'. So many of us have been burned in
similar ways, and it happens with such frequency, that even if a tenth of us
similarly afflicted folks opted in, bought the book, and downloaded the movie,
it'd likely dwarf the 13 million-dollar screwing you got.

If you go down that road, I'd ping Brokovich's consulting firm. Polish the
canonball a bit, but really, get someone of that stature with that sort of
direct 'man v. machine/in the belly of the beast' expertise. It could be
bigger than you imagine.

<http://www.brockovich.com/>

Either way, thanks for the hack story. It took guts to share it, knowing that
you'd likely get flamed to ashes with such a simple cheesecloth tale. Please
let us know what you end up doing.

Good luck with that.

------
devs1010
Dude, if you really feel you have a case then you can find a lawyer who will
take it up for you and will only take payment if they win the lawsuit, not
having money for a lawyer isn't a legitimate claim unless you really have no
valid case. Given that, you would probably need to pay the lawyer at least 40%
of whatever you win but thats better than nothing, right?

------
ra
You MUST find a good attorney with relevant experience.

If your case is solid you will come to an arrangement on deffered payment of
fees.

------
yason
You participate in a company by owning shares, or owning a right to buy shares
(for example, in an option scheme). How many shares did you own when you left?
How many shares did Anakam have when they were sold to Equifax? If you own the
shares you must have paperwork for it, back from the year 2004 or so; if so,
what does that say? Was there a vesting period and if there was, what was it
like?

Find a lawyer that can work for part of the possible winnings instead of a
fee. If you have the paperwork that proves you owned part of Anakam after when
you left it then, with competent lawyers, it should be just a matter of
computing your share of the company's final form before it was sold to
determine how much they owe you. Prepare to lose some percentage of the total
to make _negotiations easier and shorter_ , and subtract your lawyers portion
off it, too.

------
systems
between 2005 and 2010 what was your relationship to anakam? did you receive
any benefit for your 20% claim, why do you believe you are 20% owner, and why
haven't you made any claims to any money earned by anakam before

and even more importantly how did you leave, how did you settle when you left?

there is a lot of missing details here

------
boling11
Was there any type of vesting agreement in place?

------
stevenwei
If your name is on one of their patents I'm surprised that was overlooked
during due diligence when the company was being acquired.

But it definitely seems like you have a strong case based on what you have
described.

~~~
michaelrwolfe
It doesn't matter whose name is on the patents if the company owns the
patents.

------
gregory80
[I am not a lawyer, you should always consult a trained legal professional
when working with legal matters.]

Don't let corporations bully you. Find lawyers who are willing to work on the
case and pursue it. I would hope money isn't your only motivation, but if they
have committed a crime, at the very least your local District Attorney or the
FBI should review and begin pursuing any criminal charges.

Assuming any criminal complaints "stick" it will make a civil suit much easier
on you down the road.

------
sebastianconcpt
Get a NYC lawyer that agrees to take the case at his own risk.

Pitch them with your story, if they find it solid (you can prove you claim)
then you have a case and they _should_ be interested.

Good luck

------
chris_dcosta
Whatever your feelings are, if you don't have the evidence to support your
claim, you should just forget about it.

Evidence is the key to any case not the lawyers. You can't stand-up in court
and make claims if you can't subtantiate it. That's just a fact of court
cases.

Best advice : Don't become the next Winklevoss, you won't make friends and
that notoriety is not the sort I'd wish on any entrepreneur.

Channel your anger : get on an build the next big thing instead.

------
0x12
Find a lawyer that will take it on contingency.

Also, talk to 'grellas' here, he's one of the nicest legal eagles I've ever
seen.

------
WilhelmJ
Not sure if it'll add more credibility to the claim, but interestingly the
wikipedia page for Anakam doesn't talk about Founders. And the company's
official leadership page is empty!

<http://anakam.equifax.com/Company/Leadership/>

------
blakdawg
Move on with your life. You gave up on this years ago. Trying to extract a 20%
stake for some flailing around in the early years is ridiculous. You were
happy to let others do the hard work building a company, now you want to cash
in.

------
pbreit
Find a competent attorney who can work mainly on contingency and just sort the
mess out. All the extortion junk sounds like a red herring. Prepare to be
delighted by something well less than 20%.

------
waterhole
This problem is pretty simple in my opinion.

You say you own 20% right? Do you have this down on paper somewhere signed by
all parties?

If no, you get nothing. If you do, then you have a case.

Simple.

------
zerostar07
The best thing HN can do is to bury or delete this thread immediately. Any
money he makes will not be enough to pay for defamation costs.

------
chopsueyar
As most others here have said, find a lawyer who will do this on contingency.

Google _ip attorney contingency_ and go from there.

I am in a similar situation, but probably around 1/10 of the amount.

As you already know, it is fairly easy to send a letter.

I am surprised they did not also accuse you of libel. That is my favorite.

Do you happen to know the federal law regarding the accusation of crime unless
given consideration. Is it simply extortion or is there some other statute?

Best of luck, you have justice on your side!

Try to get some lump sum cash AND a yearly/quarterly/monthly licensing fee out
of this.

------
downandout
There was no vesting schedule. It was an ownership grant.

------
verroq
A healthy dose of skepticism won't hurt here. This sounds exactly like 419
scam if you choose to fund for his "lawyers".

~~~
downandout
I honestly wasn't asking anyone to fund anything. I am just seeking advice as
to what I should do. I could have them prosecuted free of charge, but I'm not
sure that will advance my cause.

~~~
Bobby_Tables
At the very least, a successful criminal prosecution would make you feel
better. And it would likely advance your cause...I'm not sure if an extortion
conviction would be admissible in a civil trial for something like this, but
even if it weren't, the fact that someone was convicted of criminal extortion
would make it far more likely you'd get a good attorney to work on contingency
for the civil complaint. Even if you only recover $1m, 33% of that is a decent
payday for a lot of lawyers.

