
One founder's nightmare - ojbyrne
http://bsmcconnell.wordpress.com/2008/09/01/an-open-letter-to-paul-hammond-ceo-of-virtual-pbx-inc/
======
brianmsf
I am the author of the article. Unless you've been in a situation like this,
it's best not to armchair quarterback. I expected a mixed reaction to this,
and that's fine.

I had a choice. 1) do nothing, hope the harassment stopped spontaneously (the
private eye I hired caught this manager trying to sabotage an unrelated deal
nearly a year after I left, so what would you conclude?), 2) fight back on my
own terms. The nature of bullies is that they continue bullying until someone
stops them. I couldn't afford to sue, and didn't want to spend the next couple
years dealing with them in court either.

I would have rather just moved on. I just wish this individual had been
reasonable. There were dozens of ways to deal with the situation amicably, all
of which would have resulted in us sticking around, and them making money from
the products they acquired. None of us wanted this outcome.

Lesson learned besides avoiding earnouts, also investigate whether a company
has experience with M&A or larger investments, and thoroughly check executive
history to find prior deals (just being in the room when someone else was
running a deal doesn't count). If they have not managed an acquisition before,
there's a high risk that they'll screw it up. It's human nature that people
don't want to admit their own mistakes, so if that happens, you'll become the
scapegoat for it all.

For buyers, the lesson learned is that in a small acquisition, you're also
acquiring living thinking human beings, not livestock. Hardball pennywise
tactics might save you some money in the short term, but nearly always create
resentment, early departures, etc, and degrade the value of what you bought in
the first place.

Take all of this with a grain of salt though, as I am a disgruntled employee,
etc.

~~~
ScottWhigham
I'm all for you standing up for yourself and we all appreciate your posting it
here for us to learn from your mistake. At the end of the day, you may be
ranting and venting a bit but there's also that spirit of, "Learn from my
mistakes so that you don't have to." Thank you, Brian, and I'm sorry I heard
to learn of you in this way. Best of luck to you.

Now go talk to your lawyer.

~~~
RobGR
I'm disappointed at the number of "go to court" and "now go talk to your
lawyer" responses here and in replies on the blog article.

Going to a lawyer is expensive. Going to court rarely helps your financial
situation. You should do it only when all other avenues are exhausted. If
publicizing this behaviour takes care of the problem (i.e., stops the
harassment, allows the poster to continue on his new business ventures), then
that is an amazingly cheap silver bullet solution, compared with the cost you
incur when you cross that law office's threshold.

All the howling for legal revenge to set the world right re-enforces my worst
impressions of Californians. Publicizing the details, which may cure the
problem in the cheapest way possible, and then making money on something new,
re-enforces my best Californian and Silicon Valley impressions.

~~~
brianmsf
Thank you for pointing this out. I just want to move on and focus on my new
project, and not waste the next two years fighting in court over a botched
acquisition.

A civil lawsuit is expensive. Expect to pay $200,000 or more, and to age about
ten years and/or develop serious health problems from the process of dealing
with people you'd prefer to throw under a bus.

The main reason I went public was so that other entrepreneurs won't make the
same mistakes I did. It's no fun to admit that you got taken, but at least
others can learn from it.

~~~
mattmaroon
Given the evidence you have, you may be able to find a lawyer who will work
pro bono. Given that they've done to you, the settlement might be never work
again type money. At least spend some time checking into it.

By blogging you're opening yourself up to lawsuits. Now you'll be spending the
same legal fees but with the good result being $0.

You're absolutely insane not to sue if half of what you say is true.

~~~
ScottWhigham
If you can't find pro bono, I think you'd definitely be able to find an
attorney who would just work for 33% (or whatever) of the settlement. No cost
up front.

------
blurry
Unlike most commenters, I would like to offer some words of support to Brian.
Much like rape victims used to be judged on everything from their dress style
to being out late after dark, you are being judged on everything from your
writing style to your choice of deal structure. If the blame lies with the
victim then surely nothing bad could happen to us, right?

All in all, I think you offered rather good reasons for structuring the deal
that way even though _hindsight_ says otherwise. It's staggeringly naive to
think that any amount of lawyering could "sort a deal out a 100%". People who
make those sorts of comments have very limited business experiences and don't
know the true meaning of the phrase "history is written by winners".

I wish you the best in whatever you choose to do next. I do hope you get a
lawyer - even if you don't like to think of yourself as a litigious type, it
will help you achieve some closure. Please keep us posted on your situation.

------
swombat
Ouch.

I totally agree with "If you are an entrepreneur, _never_ agree to an earnout
without substantial up front compensation, there are just too many ways you
can get screwed, whether by chicanery or incompetence". I have a friend who
did just that, and was also shafted in the process.

Never give your business away for free, and never count on any money after the
initial sale.

It does sound to me like this guy needs to get himself a lawyer rather than
post stuff on the web, assuming "Paul Hammond" is also US-based. My friend
couldn't do that, as his "acquirer" was based in Poland, which made litigation
difficult (lesson 2: don't sell to someone you can't sue).

~~~
michael_dorfman
...and find out how much you can sue for. I happen to live in a country where
you can't sue for punitive damages, so the worst case for the offender in a
scenario like this is that they would have to eventually cough up the money
they agreed to pay in the first place. In other words, for these people,
breaking the contract is essentially a low-risk maneuver. Nasty.

------
echair
Tip: the more personally you are involved in some dispute, the more careful
you have to be to be crisp and understated when describing it. This would be
much more convincing if it weren't so rambling. As it is, I read it and think
"I don't know the rights and wrongs of this particular situation, but I could
easily imagine that this guy would be a huge pain in the ass to deal with."

~~~
mattmaroon
Clearly he's a bit of a donkey. He has multiple exits yet is still broke. He
put himself in a situation where this could happen, which is ridiculous in and
of itself. And rather than doing the proper thing (suing someone who seems to
be clearly in the wrong and violating numerous laws) he's blogging about it
and exposing himself to legal action.

To put it another way, there's no way I would hire this clown.

~~~
kajecounterhack
Well thats going on it a bit harsh, dont you think. First of all, we havent
heard Virtual PBX's side of the story, so we can't really take sides, but if
he's telling the truth it indeed has been horrible and he should indeed sue.

In fact, I really don't get why he's not suing, unless of course, he's lying.

------
babul
Seriously, stop writing. If you are aggrieved, take the guy to court. That is
what the legal system is there for. Blogging will inevitably only prejudice a
case. If the money does not matter to you, then at least do it to set
precedent and discourage such behaviour.

I don’t know if there is Legal Aid in the U.S. (like in the U.K.) but at least
use the Small Claims Court system
(<http://en.wikipedia.org/wiki/Small_claims_court>) or contact Judge Judy (or
whoever is in vogue at the moment) to shame him more publically (as it seems
like you are following a name-and-shame strategy).

~~~
cperciva
_If you are aggrieved, take the guy to court._

If everything in the article is true, it sounds to me like a civil lawsuit is
step 2. Step 1 would be reporting the computer intrusion to law enforcement
authorities (hopefully there are good logs to document the fact that someone
accessed his VPN) -- stealing someone's account credentials and logging in to
remote systems without proper authorization isn't just a privacy violation,
it's also a crime.

~~~
1gor
An employer has the right to check private email of an employee. It seems that
the shafted guy is pissed off because he did not think that his employee
status would give his opponent the right to snoop.

~~~
1gor
To answer most of the sibling comments:

"U.S. Court Affirms Employer's Right to Read Employees' Email" at
[http://goliath.ecnext.com/coms2/gi_0199-14518/U-S-Court-
Affi...](http://goliath.ecnext.com/coms2/gi_0199-14518/U-S-Court-Affirms-
Employer.html) Keeping anything private on a corporate laptop or accessing
private email through corporate network does not guarantee any privacy at all.
There is a company right now arguing it has right to read Yahoo email of an
employee.
[http://www.informationweek.com/blog/main/archives/2008/06/co...](http://www.informationweek.com/blog/main/archives/2008/06/company_argues.html)

I take downmodding of my comment above as a sign of righteous indignation
about US privacy laws.

~~~
cperciva
_U.S. Court Affirms Employer's Right to Read Employees' Email_

Fraser v. Nationwide Mutual Insurance Company is entirely irrelevant here:
That case dealt with whether a company has the right to access emails stored
_on the company's server_. There's a question of privacy there, but not one of
computer crime -- Nationwide Mutual Insurance Company did not access computer
systems without the owner's permission. This is manifestly different from the
situation as I read it to be here, where it was being alleged that the
article's author's VPN was being accessed without his permission.

The Structured Settlements case is more relevant, but it fails on two counts:
First, the legal theory being put forward by Structured Settlements involves
them merely observing what Mr. Palma had done on one of their computers --
their claim is that they didn't access his Yahoo account, but merely saw him
accessing his Yahoo account -- and second, the Structured Settlements case has
yet to be tested in a courtroom.

Yes, the US has very weak _privacy_ laws, but that doesn't extend to its
_computer crime_ laws -- and accessing a computer system without authorization
is a computer crime, not just a privacy violation.

And of course, IANAL, the above is not legal advice, etc.

------
rgrieselhuber
It doesn't seem like a rant to me.

It would be good to hear the other side but given the fact that litigation is
pending, comments aren't likely to come. If it's all true, then clearly
Virtual PBX is a company to stay away from.

I appreciate the lessons McConnell provides here and wish him better luck next
time.

------
bisi
I dont blame the writer for blogging the incident . he has already said he has
facts and witnesses and he would not risk telling a lie to the whole world ..
sometimes you have to tell your own side of the story because even potential
investors will wonder why youhave not made a statement to defend yourself. If
nothing comes out of it readers can learn a thing or 2 from the story ...

------
DenisM
Here's one helpful tip that served me well: if you are not a good judge of
people's character then don't try to judge their character. Instead, always
judge their apparent motives.

This works well in business and politics.

How do you know you are a good judge? For example if you are a police
investigator with 500 solved cases behind you, you are a good judge - you got
experience. If you don't have similarly large experience you're likely not a
good judge.

------
george
There appears to be an update on this story - from the Venturebeat article
[http://venturebeat.com/2008/09/01/when-selling-your-
company-...](http://venturebeat.com/2008/09/01/when-selling-your-company-
beware-of-earnouts-you-may-lose-your-shirt/)

The company says he used a personal email ID to conduct company work. All the
email was on the company computer, and they looked at that account to get the
business related stuff. Seems to me like this is a case of an ex employee that
is pissed off and seeking personal revenge. Anything on that commputer belongs
to the company. Cant comment on the contract stuff, but given the inflamitory
way he talked about the email - who knows what the truth is about the
contract. Sour grapes - I think his ranting is doing him more harm than good.
who will want to do business with him now he shows how he deals with issues in
public and not through reasonable normal business channels

------
Bryden
Found the official response from the company posted at O'Reilly

There are always two sides to a story. Looks like VirtualPBX offered to
rescind the deal and are asking him to resolve the dispute through the dispute
resolution procedures that are already outlined in the agreements he's signed

So why is this guy blogging about this - looks like its hurting him as much as
anything else

This comes straight from the article ->>>>>"Virtual PBX is a small, privately
held, non VC funded, 10-year old family enterprise that took a calculated
business risk by acquiring the assets of Brian McConnell's business in an
attempt to further the progress of its technology. Brian willingly signed a
business agreement with Virtual PBX and subsequently entered into an
employment contract with the company. Those facts are not in dispute.

Virtual PBX contends that Brian breached material terms of the agreement as
well as the subsequent employment contract. We do not believe it appropriate
to discuss the nature of the ongoing contract disagreement publicly, despite
the fact that Brian has issued a stream of what we regard as misleading and
even malicious statements in his blog about the relationship.

We do take exception that Brian has chosen to invoke the mantle of privacy as
a means to avoid taking responsibility for his behavior. He chose to store
large volumes of data on a company issued laptop, some of which was unrelated
to company business. The laptop and the data stored on it were appropriately
retained by the company upon his departure. The company's only interest in the
data stored on the computer is that which relates to business issues. Brian's
allegation the company committed cybercrime is malicious and unfounded. It is
unfortunate Brian has chosen to pursue counter-productive rhetoric in lieu of
reaching a mutually acceptable and business-like solution to this contract
dispute."

Also says ---- They told me the company "has also requested that he resolve
the dispute through the dispute resolution procedures that are already
outlined in the agreements he's signed, and that Virtual PBX has even offered
to rescind the deal with him and give him back everything he sold to the
company including the IP."

------
anamax
Earnouts seem to combine the worst properties of a purchase and an investment.

------
daniel-cussen
IANAL, but may I humbly suggest (from what little I know) that the poster take
this down, seeing as the consensus here is that this post might hurt your
case?

------
inovica
This kind of post doesn't do him any favors. If its true (and that is up for
debate) then it's still down to him not sorting the deal out 100% before he
gave everything away. Business really can be a nasty place and he should
really have had everything tight legally from the start of the deal.

------
whatusername
in part it seems like a "the-world-is-out-to-get-me" one-sided rant.. But
there seems to be some good lessons to be learnt there, and it may very well
be a reasonably accurate statement of events..

~~~
noonespecial
I think that the lesson here is that the world, in fact, _is_ out to get you.
Act accordingly. Hopefully his hard lesson can keep others from going down
similar paths.

~~~
michael_dorfman
Amen. I'm in a shockingly similar situation to the one the author describes,
and I can agree, it's not fun. There are folks who really are out to get you,
and will take advantage of any opening. Bottom line: find a lawyer you can
trust, and rely on them heavily.

------
agentbleu
This is a post I made which also goes into general some of the range of
tactics used by rogue 'competitors'.

[http://thenextweb.org/2008/05/24/david-vs-goliath-the-
underh...](http://thenextweb.org/2008/05/24/david-vs-goliath-the-underhand-
tactics-of-competition/)

------
johnrob
Maybe the author should rewrite this so that the reader can get to something
interesting in less than 15 minutes.

