Part VI: How I earned $6 million and never collected, so far Funding a start-up company, especially one that goes public on the Nasdaq or any other stock exchange, is a touchy challenge and most times an insurmountable one. Why should anyone risk capital on a hot idea with not much else? What’s the track record of the start-up team? How is it there’s an idea, all right, but no product fully developed? How ‘bout a heavy idea with a lightweight in charge, a thirty-something business school student with no job and no executive experience? The lone idea had better be a hot one, a red hot idea that could revolutionize its industry. At Affinity we really thought we were about to revolutionize the consumer finance industry, and that’s just how we put it to our seed capital prospects, called angels among business start-up types. In every pitch we gave – that would include me and our founder Norris and often our CFO Bannon – we disclosed my 1% ownership as a done deal. I was personally in the deal and I was committed. I was an owner. In September 1993 when Bannon was invited to dinner with me and Norris at the Japanese restaurant Yagoto in Greenville, near where Bannon already had other business, Bannon was suitably impressed with the potential of our hot idea of loan scoring software that could approve a small loan application in seven minutes without any human interference. “This could go big,” Bannon said inside Yagoto. Bannon managed the seed capital through Sequoia Capital in 1977 for Apple Computer. He understood big. On the other hand, to be brutally honest with us, Bannon reminded us of our long-shot status in getting funding. And what was true in 1993 is still the case today. Edmund S. Phelps, a professor of economics at Columbia University and a Nobel laureate, explains start-up funding in his new book, “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change.” He cites a McKinsey study that said, “…from 10,000 business ideas, 1,000 firms are founded, 100 receive venture capital, 20 go on to raise capital in an initial public offering…” Out of 10,000 business ideas, Affinity could include itself among the 1,000 firms founded – that made us one in 10 - and out of that cluster Affinity was one of the 100 receiving venture capital. We made it to the 100 funded out of the original 10,000 business ideas – so we were at the top 1% - and then we became one of the 20 out of 100 funded to go on to raise capital in an IPO, which meant we were the top 5% of the 1% funded with venture capital. That was simply startling. In the beginning at our meeting with Bannon at Yagoto in Greenville, Affinity’s chances in making it among the few start-up businesses with capital from an IPO were 1 in 500. Norris’s idea – just an idea, worth very little - began in the spring of 1993 and went public on the Nasdaq in the spring of 1996, making Norris worth about $240 million in the market value of the shares of Affinity stock he owned. My contracted 1% of the outstanding shares was worth almost $6 million. To do that then and today you have to start with a hot idea and pitch that idea to people who can help. And with us at Affinity it was the same sequence. How could Norris find people who could help? He needed to get lucky, and in Affinity’s case, he needed to get Ligon. That’s how it all started. That’s how Henry McMaster, then chairman of the S. C. Republican Party and now former S. C. Attorney General, put it in both his sworn deposition and his testimony before the Affinity trial courtroom. Ligon brought in Bannon, who showed Norris how to structure the company to receive venture capital. Ligon brought in McMaster. Ligon and McMaster, mostly McMaster, brought in Mack Whittle, CEO at Carolina First Bank, and Whittle brought in the venture capital, his bank’s money. Keep that in mind: Whittle delivered his bank’s money, not his own. More on Whittle later. Since I was not delivered my shares of Affinity stock at its IPO in the spring of 1996, my lawyer Cleveland filed suit that fall, and trial was in summer 1998. We asked for the full value of my shares in the two weeks following the IPO, about $5.4 million, plus penalties and lawyer’s fees. Due to jury tampering by my girlfriend – talk about long odds - we got an award from the jury of $48,000 against Affinity and $20,000 against Norris. We appealed and we had a second trial in 2004 which found for me in the amount of $386,148. Affinity went bankrupt, and Norris saw liens attached to his houses by my lawyer Cleveland. By now, almost 10 years after the second trial, we might hope Norris can cough up. At the legal interest rate of 14% since judgment, my award is approaching $1.5 million, nowhere near the value of my shares (plus interest) around the time of the IPO and all without penalty and no help with lawyer’s fees. Meanwhile, with my inadequate understanding of the law, I really must continue to go after the jury tampering team. In the first trial Norris was represented by Columbia-based Robinson McFadden & Moore in the persons of Jackie Bartley and Jim Brailsford. But when I reported my suspicions of jury tampering to their senior partner Dave Robinson in September 2000, he looked into the matter and within a few months, Bartley and Brailsford were kicked out of the firm, probably by the beginning of 2001. Brailsford moved to Edisto to hang a shingle, and Bartley went to Nexsen Pruet Jacobs & Pollard, Mayor Coble’s firm. I can’t remember when, but Bartley left Nexsen Pruet to work on her own. Bartley passed in her bed on the last Thursday in August, 2013. The McNair Law Firm’s Columbia office represented Affinity with two lawyers, Robert Widener and Jane Trinkley, who worked with lawyer Mark Henriques of Womble Carlyle Sandridge & Rice of Charlotte. I can’t say, even with Robinson’s corrective action, for certain if any of these people knew about the jury tampering. Probably not until after the trial, if at all. But lawyers are supposed to report jury tampering if they know about it, and apparently none reported. We went to a second trial against the jury tampering team. Was the second trial’s jury not supposed to hear about the jury tampering? Should the second trail’s judge not hear about this? Should the S. C. Court of Appeals, when it agreed with Judge Casey Manning and sent us back to trial, not hear about this? Is there a lawyers’ ethics panel of some sort in South Carolina that looks into such matters? Do lawyers have an obligation to try to keep our system of justice, our national pride, clear of jury tampering? This judicial jihad cannot be tolerated, we citizens of the United States are led to believe. Our system of justice is why we fight. What about my close friend Kuna, the architect for a state law enforcement agency, the S. C. Department of Public Safety? Does the reported payment of $30,000 to her from Norris not indicate something? The investigator for DPS never saw any drawings or other work product that would explain the $30,000. Why not? But even if drawings do surface, and Norris and his wife say, “This is what we wanted,” the whole mess puts Kuna in a position for a full investigation by the State of South Carolina on criminal charges and even by the state AIA chapter on ethics charges. Does the U. S. Attorney’s interest finally get piqued again? In early fall 2001 there was a federal grand jury on all this, but nothing more was heard. What does Wadford, Kuna’s good friend and smiling client and tampered juror, say about all this? He had been working with Kuna for what he said was at least a year before the trial, and Kuna during jury selection the Monday of the week of the trial famously said, “Never heard of him.” And then there’s the possibility of jury tampering in the second trial. No one on the jury or on the bench or anywhere else in the courtroom, as far as I could understand, said anything whatsoever about the origins of the dollar amount in the judgment of $346,148. Where, exactly, did that come from? Affinity’s expert witness, Maury Hatcher of Atlanta, was invited up to repeat his testimony from the first trial, where he identified dollar amounts along a timeline in the value of my 1% ownership. That’s where the jury found their $48,000 against Affinity and $20,000 against Norris in the first trial. In the second trial I asked my lawyer to go for the contracted debt, the value of 1% ownership upon the IPO. No other time should be considered because that’s what we were suing for, the value at the time the shares were contracted to be delivered. I argued we should use the same language found in Judge Casey Manning’s call for a second trial, affirmed by the S. C. Court of Appeals. If we were going back to trial to collect $5.4 million plus penalties and lawyer’s fees, then no other dollar amount mattered. It was all or nothing at all. Either I had a contract or I didn’t. We might not get penalties and lawyer’s fees – I had no idea how that worked – but we should insist on the contract amount. If the jury found for me and my contract, there was no wiggle room in the judgment dollar amount. To block the wiggle room from entering the courtroom, lawyer Cleveland, for the first time, objected to Hatcher’s testimony when he first sat down in the witness chair in the second trial. It wasn’t relevant and it wasn’t needed, Cleveland said. Judge Manning’s language in calling for a new trial said as much. And the Appeals people agreed. The second trial’s Judge Lee also agreed. Hatcher was sent packing back to his Atlanta office, but remember that his testimony was expected in the courtroom up until the time lawyer Cleveland objected. Sounds a little like a surprise trap to catch the jury tampering team. Did some of Hatcher’s numbers get to the jury anyway? Did the award of $386,148 come from a secret feed to a juror, under the assumption that number would surface in Hatcher’s testimony, becoming available for the jury’s use in determining my judgment dollar amount? In our courtroom, in our system of justice, once we find jury tampering, why should we not expect it to continue? (To be continued.)
Posted on: Thu, 19 Sep 2013 23:49:03 +0000
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