Verizon signed a non-disclosure document in April of 1999, 5 months prior to signing the merger agreement and paying Northpoint $150M in cash. Verizion certainly has people qualified to go over the books and to do due diligence, and they had plenty of time to do that. Subsequent to the merger agreement being signed Verizon had a team that worked at and with Northpoint refining the inventory of capital assets, which was required prior to closing the agreement. Also, Northpoint complied with their end of that mutual discovery process by fully "baring all". As of November 29, 2000, Verizon hadn't done anything on their part to live up to this part of the agreement. Why bother if they didn't plan on going through with it from the start.

Legally Northpoint didn't have to write off the $6M in overdue receivables when they did. They could have floated them in the books, as many companies do, for considerably longer and further they could have delayed while they said they were negotiating sales of these receivables to a collection company. Writing down $6M when they did was an aggressively honest thing to do.

Comparing Northpoint's balance sheet and cashflow with those of competitors of similar size in the same industry will tune you in quickly to the fact that Northpoint was managed EXCEPTIONALLY well. $6M in uncollectable receivables was not at all extraordinary, writing it off as quickly as Northpoint did was. A one time $6M hit was not a significant event to Northpoint's cashflow sheet or business plan. Revenues and cashflow were increasing -- and in a tough market. Put Northpoint's stock on a graph with the telecom industry index, or FON or T or MCI, not to mention any of their DSL competitors and you'll see that Northpoint was not a weak stock in an industry that was trending down.

I was engineering for a company that resold Northpoint. We analyzed a potential partners 10k before we did business with them. It was like getting whacked in the head when Verizon did what they did. The merger agreement did not allow Northpoint to pursue financing from anyone except Verizon. Northpoint couldn't even access their existing open credit lines (which makes sense when your bound by an agreement). Verizon then let Northpoint use up their funding (they knew exactly how much they had) and pulled the plug when they knew they wouldn't have enough to continue operations