The birth of Stockskill.net explained

2. In most bankruptcies of public companies, shareholders get little or nothing back. Of course there are some exceptions. How much hope do you have that NorthPoint shareholders will get something back? What could you have recouped had the Verizon suit not been settled against your will?

NorthPoint is not your average bankruptcy where hard assets are auctioned of and shareholders know they're screwed.

NorthPoint has a unique, strong and very winnable lawsuit in front of a jury, asset

If Verizon strung NorthPoint executives along on how strongly they wanted the merger while privately thinking otherwise (misrepresentation) and backed out of the contract at a critical time in the start-up's history, then the resulting bankruptcy liability is Verizon's - maximum damage!

So what if NorthPoint had problems with non paying customers who were on the verge of bankruptcy - that was not NorthPoint's fault. That was a data industry problem specifically ALLOWED in the merger agreement.

NorthPoint's MAC clause was not boilerplate in the merger agreement, it was spelled out specifically that a MAC could not be triggered by a decline in the data industry or stock market. NorthPoint made sure of this in hammering out the agreement because they were aware that the data industry had been declining, as I'm sure Verizon was too. Ask Peter Thonis or Mr Babbio at Verizon how their Flashcom or Metromedia businesses were faring in the fall of 2000. Yup they knew.

The 6 million restatement that Verizon is crying about is insignificant in comparison to the 2.15B value of NorthPoint

NorthPoint had lost 80M Q1, and 112M Q2 , before entering into the merger agreement, and Verizon signed the merger!

NorhPoint lost 137M in Q3. This was to be expected by Verzion - Especially in light that Verizon knew the start-up would continue to invest heavily on building out the new network with the Verizon's cash infusion.

plotting these Q's results in a basically straight line anyway - no radical difference.

NorthPoint's Trustee said she represented shareholders, even to the court.

NorthPoint's Trustee was quoted publicly on numerous occasions espousing the strength of the case.

NorthPoint's Trustee conversed with shareholders answering many questions both by e-mail and on the phone.

NorthPoint's Trustee encouraged shareholders to forward anything they discovered that might be useful and to attend the trial.

Because it is the digital age, we had access to court documents electronically and could monitor our Trustee's and law firm "actions"

NorthPoint never lost a motion

Investors placed 30 bids to win the right to fund NorthPoint's lawsuit.

"smoking gun" statements and correspondence from top Verizon executives contradicting their exercising of the MAC clause and wanting 100% of NorthPoint (presumably DEAD or ALIVE)

Recent precedent setting case ( IBP VS Tyson ) of similar stature involving buyers remorse citing a MAC clause. The court ordered the merger to go forward.

Public (and editorial perception) is strongly behind the theory (widely backed by much evidence) that the incumbents (bell companies i.e. Verizon) used every tool in their arsenals (legal or otherwise (-- this case could have proved that!--) to bankrupt the new found competition (C-LEC's or Competitive Local Exchange Carriers) born of the 1996 Telecommunications Act.

A green light was given by the courts to proceed to trial on the misrepresentation and fraud charges against Verizon, in just 9 business days . With all of Verizon's discovery, depositions, and dirt digging, they could NOT convince Judge McBride that NortPoint did not have a case.

Even if NorthPoint could not convince the jury of the fraud and misrepresentation charges - they had an excellent chance of proving illegal termination of a binding contract worth 1B + costs + interest + possible punitive damages.

An environment where the average citizen feels more and more continually victimized by corporate America (the case was to be heard before jury and not on person)

Based on these factors, and all of the substantiating links I think there was a very strong chance for the estate to recoup at least $1 billion. There was only $750 million in creditor claims ahead of the common shareholders.

But more importantly than the money what we are loosing is a story that needs to come out in the courts. A JURY COMPRISED OF PEOPLE LIKE YOU AND ME MUST ONCE AND FOR ALL DECIDE IF THE BELLS DID ACT IN BAD FAITH, HELPING TO LEAD TO THE DEMISE OF ALMOST ALL THE NEW FOUND COMPETITION IN THEIR SPACE.

As to what we SHOULD recoup: Creditors and shareholders should be made whole. For shareholders that would be $2.50 cash AND one full share in the "new NorthPoint for each share of ownership in the "old NorthPoint"

3. When I started researching this article, I was pretty sure that lots of bankrupt public companies, in addition to NorthPoint, would have activist shareholders communicating over the Web. However, when I tried to find more examples of such online shareholder activism this afternoon, I came up almost blank. Are you aware of any other bankrupt companies that have spawned online communities of activist shareholders or similar groups?

No, but I have never seen anything like this before (in reference to such a strong case being settled how it was)...something "smells" funny here, and that has really peaked the "activist" in NorthPoint shareholders.

We received an inquiry from a rich guy a few months ago who wanted to know how to start a Shareholder's organization and we told him we'd tell him everything we know, but he did not contact us again.

If they investors just use message boards and e-mail you'll never know they're out there.

Because there was such a wealth of information that needed cataloging for shareholder reference and because I was comfortable with HTML I decided to make a website. I had no Idea how involving it would become.

I was curious myself awhile back, here is what I found:

.Compaq settles accounting lawsuit with shareholder group

A clear victory for this Shareholder Action Group, the offer delivers the shareholder value that we have strenuously campaigned for over the last 3 months. http://www.stopexc.com

Citing the possibility of a diminished voice in company affairs, a growing group of Iomega Corporation (NYSE: IOM) investors, claiming to hold millions of shares, is calling for rejection of a proposal to cut the number of outstanding shares by 80 percent via a "reverse split."

Rainforest Cafe Shareholder Group

Garrity says the shareholders represented by his group have lost millions on their investments. They've retained a lawyer and are reaching out to creditors, bondholders and the bankruptcy court.

4. Under the bankruptcy process, common shareholders rank last after bondholders, secured creditors and preferred stockholders. Given this lowly legal status, how do shareholders fight to get something back for their investments?

It is not about the shareholders alone. Many good people, dedicated and bright people, have lost their jobs, and many companies all the way through the corporate food chain have gone under as a direct result of all these anti-competitive activities.

For this to NOT go to trial would make me feel like the entire legal process, from the Trustee that assured us that she had our COLLECTIVE interests in mind, to the courts who put the trustee there in the first place, claiming to know what was in the NorthPoint estate's best interest, and the law firm that we (the NorthPoint Estate) hired, was corrupt, or at the least not acting in the interest of a "whole" of NorthPoint's estate.

5. How does activism help your chances of getting something out of the bankruptcy process? How successful has the website been in making your opinions heard by those overseeing the NorthPoint bankruptcy?

In hindsight I feel like I, and all of us who collaborated online, were used, victimized and left behind as if they knew that THEY had all the power here. Like they thought we would never be able to band our resources together to fight this. Now that the shock of feeling backstabbed is wearing old, We are getting off our fallen horses and we are mounting fresh ones.

6. What do you plan to do now that the trial has been scuttled by a settlement?

We are drafting formal motions to the courts. First is a Motion to set aside the Trustees recommendation of settlement. The second is a Motion to reduce the Fee to the Trustee. Additionally we have been attempting to contact and solicit support from creditors. Lastly we are seeking to contact the media in hopes of shining a bright light into the dark shadow cast by the all powerful Verizon communication Corporation and the U.S.Trustee system.

Frank Harding
Frank@StockSkill.net

P.S. this story from DSL Reports.com came out yesterday.

Jonathan Gallen a bondholder and a shareholder, who initially funded the lawsuit, purchased an additional 3.5M shares on 7/24/02 and 7/26/02

This article from DSL-Prime explains how good this deal was for Verizon.

This article from Acominteractive.com explains the state of the industry 2 months into the merger agreement.

You may find this very informative too: Putting Shareholders Back into Shareholder Litigation

or this on: Why didn't more shareholders make trouble before the corporate scandals?

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THANK YOU for your time, and the effort you will put into your article.
I hope you will find my answers satisfactory.
Frank Harding
Frank@StockSkill.net