Nearly Two Years and Michael Robertson Remains Silent to Linspire Shareholders

Michael Robertson still not talking to shareholders.

It's been nearly two years since Michael Robertson sold Linspire to Xandros without any shareholder input. To this day, Robertson has never held a shareholder meeting or sent any communication to the one hundred or so Linspire shareholders with the details about that transaction.

It took a shareholder lawsuit (which Robertson unsuccessfully tried to thwart) for Robertson to finally come up with any information. After a year and a half, that case was finally settled. Here is what was disclosed from that settlement:

Kevin La Rue 7:36am March 11th, 2010

Dear Fellow Stockholder of Digital Cornerstone (formerly known as Linspire, Inc.),

As you may know, in October 2008, I initiated a lawsuit as a shareholder of Linspire relating to actions taken by Michael Robertson and Larry Kettler in operating Linspire and their mismanagement of the company. I have settled this matter, receiving no money from Linspire personally, but required that a condition of settlement be that I be allowed to disclose to the other shareholders the information I learned during the litigation about what happened to the company’s assets.

Specifically, under the terms of the settlement agreement, I have been authorized to disclose to the shareholders of Linspire how Linspire’s funds were used by category, how much cash Linspire had at the time its assets were sold to Xandros, and a specific accounting of distributions to Linspire’s shareholders or shareholder related entities. It is important to note that the settlement specifically states that this disclosure I am making is not made on behalf of Linspire, Michael Robertson or Larry Kettler.

Based on the information I received during the course of the litigation, below is the disclosure I have been authorized and am able to make to each of you:

As of July 31, 2007, Linspire had $3,802,531.20 of cash on hand. As of June 30, 2008, when Linspire sold substantially all of its non-cash assets to Xandros, Inc., Linspire had $1,077,952.58.

Between June 2007 and June 2008, Linspire expended: $286,329.96 on its data center.

Between July 2007 and July 2008, Linspire expended: $1,629,907.06 in payroll expenses.

Between June 2007 and June 2008, Linspire paid Ajax13, a company related to Michael Robertson, $180,000.00 for a licensing fee for certain software Linspire was allegedly using.

In September 2008, Linspire transferred $600,000.00 to “SKL Trust, Michael Robertson” for “MP3Tunes Pmt.”

Finally, Xandros acquired Linspire for 4,098,360 shares of Xandros (a privately held company). I was unable to verify the valuation of those shares or to obtain who or what entity currently owns these Xandros shares.

I have tried to send this information to all the shareholders of whom I am aware and for which I have a method to contact them (via email addresses or social media services). To the extent you know any other Linspire shareholders, please feel free to forward this to them for their information.

Yours,

Carl Kevin La Rue

It would appear this is the best the Linspire shareholders can hope for. No shareholder meeting. No detailed explanation. In fact, you'll notice one of the terms of the settlement was that the disclosure was NOT made "on behalf of Robertson," who is clearly doing everything possible to avoid any accounting to Shareholders.

I'm sure the Linspire common shareholders would still like to know:

What was the valuation of the Xandros stock? Who holds that stock now? (Presumably Robertson took this as the preferred shareholder.)

What in the world did Linspire need from Ajax13 to warrant a $180K payment to this Robertson-owned company? As the former CEO for Linspire, I can't think of a single thing that Ajax13 had which Linspire needed, but I can certainly see Ajax13 needing Linspire's cash.

It appears that Robertson forced Linspire into liquidation so he could take the $600K (and presumably all the Xandros stock), and yet has kept the company going to attack former employees. The 100 some-odd shareholders still hold stock in Digital Corner Stone, Inc., and that company has lawsuits going on, attacking former employees and trying to shut down Freespire.com. I still own shares of that business. I don't want to see them attacking good people. To this day, Robertson is using Digital Cornerstone to attack Theresa, Cliff, Randy, and others, forcing them to each spend thousands in legal bills defending their good names.

I have no problem with Robertson as a preferred shareholder getting what is rightfully his due. What I DO have a problem with is 1) him doing everything he did without sharing any information to shareholders for years, and 2) him transferring the assets out of the company as some "liquidation," and then keeping the company going so that Robertson can attack good, honest people.

Michael acts as if because he put up millions, he's the only one who deserves to be treated with any fairness or respect in the Linspire failure. He gives no credit to the 100 or so shareholders who wrote checks to buy shares in the company and exercise stock options, or the employees who worked countless, dedicated hours. When I left there, the team of employees left the company profitable with millions in the bank. How are they rewarded? With legal attacks. The $600K Robertson took was only made possible because of the work those employees did. You could take all the salaries from all the employees he is attacking, for the entire time they worked at Linspire, and it would not equal the revenue these employees brought in to Linspire in their last year there alone. Way to "take care of the peeps" Robertson.

Not long ago, I emailed Michael and offered to take down Freespire.com and even purge all my blogs about him if he would back off his legal attacks against these good people. Robertson declined my offer and to this day continues his attacks.

Even if what he did was technically proper, the way he has treated shareholders and employees is unethical and wrong. That's what I have a problem with.

Kevin

Gizmo5 / SIPphone Shareholders--Beware of Michael Robertson's History

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There have been rumors reported in the press that Gizmo5 (SIPphone) could be sold soon (now confirmed here). In a previous blog, I cautioned any prospective buyers to be sure and do full due diligence. I encouraged them to not just take Robertson at his word (something no one should ever do with someone like Michael Robertson), but be sure and take a full accounting of any code, data centers, and speak personally with each and every employee.

Today, I want to caution any Gizmo5/SIPphone shareholders. They should look at how Michael Robertson dealt with the 100-some-odd Shareholders at Linspire when he sold that company's assets.

Here is what happened at Linspire:

1. Robertson sold Linspire without any input or notice from the majority of individual Shareholders. Even large shareholders, such as myself, were kept completely in the dark.

2. Millions in cash is still missing and unaccounted for to Linspire shareholders.

3. Robertson sold all the Linspire assets in a secret, backroom deal that to this day the terms of which have never been disclosed to the Linspire shareholders. Linspire's assets were sold well over a year ago and Robertson hasn't given ANY report or accounting to the Linspire shareholders. As I predicted, it would require a lawsuit to get Robertson to tell shareholders what happened, and even after that, we still have no answers.

4. The only accounting that was made, was Robertson talking to the press, where he basically said he and his father-in-law, as preferred shareholders, would be the only ones to see anything from the sale.

5. To date, every Linspire common shareholder has lost 100% of their investment, without any notice from Robertson, who remains in hiding from Linspire shareholders. (Actually, ONE common shareholder, Tina Stahlke-Donaldson, was able to sell some of her shares back to the company at a nice profit, after Robertson forced the CFO to accommodate that transaction. Why the special treatment for this one female employee? More on that in a future blog.)

Because VC's are involved at Gizmo5/SIPphone, they may force Robertson to behave more ethically there than he did at Linspire. However, my advice to any Gizmo5 shareholder would be to not sign anything without a full accounting BEFOREHAND. My instincts tell me that you, just like the Linspire common shareholders, could also walk away with nothing, even if Robertson does. Michael will want big numbers to be splashed around in the press so he can pretend to have had a success, but in the end, how much did individual shareholders make? (Thousands of shareholders lost millions at MP3.com, and Linspire shareholders lost all their investment and STILL don't even know what Linspire sold for.) If you are in fact going to get the shaft, you better have Michael explain himself BEFORE the deal is done. If Gizmo5 sells to a big company, that company may never disclose the actual purchase price, and if Robertson treats you the way he did Linspire shareholders, HE will never tell you either.

I'm not sure why anyone would pay more than a few million for Gizmo5, but even if Robertson were to sell it for a big number, I predict the common shareholders still see little to nothing. The VCs will likely have 3x or more liquidation preferences, and knowing Robertson as I do, I wouldn't be at all surprised if he will somehow get the same treatment with his shares. Even if someone was crazy enough to value Gizmo5 for tens of millions, watch how quickly Robertson can "creatively" make sure that as much as possible drops to his pockets, not the common shareholder's.

Why would Robertson suddenly get generous with employees and common shareholders? He is the greediest person I know. Remember, this is the same person who tried to have several former employees arrested for "embezzlement" in a failed attempt to try and take back their severance payments. When those attempts were flatly rejected by the San Diego police department, he then sued these employees to get his greedy little hands on THEIR severance. All that failed energy, work, and harassment over a couple hundred thousand dollars?!? Why would any expect Robertson to suddenly grow a conscience?

Ask questions BEFORE any deal is done, otherwise, you could end up just like the Linspire shareholders, with shares of stock worth less than toilet paper and no answers.

I hope I'm wrong, and the Gizmo5/SIPphone shareholders actually see a return on their investment. I'll be sure and report if they do. At the end of the day, Robertson's real worth will not be determined by how much money he lines his own pockets with (like he did at MP3.com), but how much do ALL the investors make? THAT is the number that REALLY matters.

Kevin

Michael Robertson, the greediest man I know.

Michael Robertson's Two Years of Silence to Linspire Shareholders

Michael Robertson loves to talk, except to shareholders.

Today, July 31, 2009, marks the two-year anniversary of me having resigned from Linspire. (I resigned after Michael Robertson tried to take advantage of several long-term employees, whom he later called embezzlers for having taken fair severance payments. Class-act move Robertson.)

At the time of my resignation, in an effort to save the company (which I was certain Robertson would destroy in short order), I offered to purchase control of the company by buying up stock for around $.50 a share (in cash). Robertson didn't even respond to my offer, and in under a year, the company was gone. Robertson tried to save face by saying he had sold the assets to Xandros in a back-room deal. Knowing this was a sham, and that Linspire stock was now worthless, I offered to let Robertson purchase my shares for ONE FIFTH of what I had offered to buy it for only ten months prior ($.10 per share). Of course, he knew the company wasn't worth anything and didn't accept the offer.

So, here we are, two years later, and around 100 shareholders have not heard what happened to their investment in Linspire. Anyone thinking of investing in Robertson should look carefully at how he has treated the Linspire shareholders, employees, customers, partners, etc.

Below is some toilet paper I purchased yesterday and a copy of my Linspire stock certificate. Can you guess which one is worth more?

One roll of toilet paper: $1.19

694,328 shares of Linspire stock: Worthless

At least the toilet paper is twin-ply, soft and absorbent.

I had offered to BUY Linspire shares at $.50 per share, and in the blink of an eye, Robertson had turned it into less than the value of a roll of toilet paper. Greedy, unethical AND incompetent. No wonder he's a coward to face the shareholders.

Kevin

Michael Robertson Wins for the Craziest Digital Music Idea

Michael Robertson, always the wanna-be defender of the little guy (while stepping all over shareholders, former employees, vendors, customers, musicians, partners, copyright holders, etc.), asked in his latest blog for people to vote for the "Craziest Digital Music Ideas Ever."

Boy, he sure forget a whopper from his list:
My.MP3 - Michael Robertson's pet project which tanked MP3.com from a market cap in the billions to millions. MP3.com went public for over $25 per share, and ultimately sold for under $6 per share. (I'm not sure my dog could have done that poorly.) As usual with Robertson, many investors lost big and employees who held stock options were left underwater, and the artists and customers (who Robertson built MP3.com on the backs of) lost a once-promising website. Of course, Robertson made off big, even if most other shareholders didn't.
Why it was crazy: Because it blatantly violated copyright law, and handed MP3.com the largest judgment for copyright infringement in history. "The complex marvels of cyberspatial communication may create difficult legal issues; but not in this case. Defendant's (MP3.com) infringement of plaintiffs' copyrights is clear." ~ Judge Rakoff
When I get asked, "How do you start a small business?" I answer, "Buy a big one, let Michael Robertson run it, and wait awhile." Robertson never wanted to be known as a "one trick poney." I never understood that. What was his FIRST successful "pony?" Destroying MP3.com?
Kevin

Michael Robertson Loses Motion in Shareholder Dispute over Linspire's Missing Assets

I have some good news to report to the 100 some-odd shareholders who remain in the dark about Linspire's missing cash and assets...

Robertson Loses Motion in Shareholder Lawsuit.

As I had reported back in September, Michael Robertson and Larry Kettler were sued in a derivative lawsuit, alleging misconduct by Robertson and Kettler which harmed the Linspire corporation and its shareholders. (Linspire had millions of dollars in the bank just months prior to its demise, but Robertson remains silent as to what happened to the corporation and Linspire's cash and assets, leaving minority shareholders in the dark.)

You would think with all the attention Robertson has been getting by ignoring the Linspire investors and shareholders, that he would be doing all he can to come clean to them as to what happened. Instead, Robertson's tossed out a legal maneuver which I believe was simply a ploy to try and intimidate the plaintiff who had sued Robertson on behalf of the company and shareholders. Robertson filed a motion to force the plaintiff to come up with a $50,000 bond before they could continue with their case against Robertson and Kettler.

Robertson and Kettler Lose Motion

This week the court denied Robertson and Kettler's motion requiring the bond, which means the case can continue to discovery and eventually to trial.

Even though Linspire minority shareholders still remain in the dark as to what happened, this is at least a small victory for them to see that Robertson will eventually have to explain himself in court.

It says a lot about Robertson when it has taken this type of lawsuit to get him to explain to shareholders what happened and that he continues to fight the process rather than just being forthright with the shareholders.

The question remains: What is he hiding?

Kevin

Michael Robertson--Still Hiding Details About Linspire's Demise

Five Months And Counting--What Happened to Linspire?

It's been five months since Michael Robertson sold off Linspire in a secret back-room deal with Xandros, and yet, the 100 some-odd minority shareholders haven't received any details about this transaction. Robertson has time to file frivolous lawsuits against me to try and take away my freedom of speech, but he doesn't have time to talk to all those shareholders who have lost thousands and thousands of dollars on worthless Linspire stock.

Is there anyone who can be left with doubt as to Robertson's attitude toward employees, investors and shareholders?

Michael Robertson--No Respect for Investors and Shareholders

The lawsuit against Robertson over the missing cash continues, but for Linspire shareholders, we remain completely in the dark.

What is Robertson hiding? Incompetence? Greed? Theft? All three? After five months, if he had a reasonable story to tell shareholders, wouldn't he have done that by now?

By my calculation, Linspire blew through around $35 Million and left absolutely nothing to show for it. Perhaps Robertson is just embarrassed by his colossal failure with Linspire. I netted a profit during my two years as Linspire's CEO, and there were millions in the bank when I left, yet in one quick year it's all gone.

Linspire, SIPphone, MP3tunes, AJAXwindows, not exactly an impressive track record. I can see why Michael prefers to keep in hiding.

Kevin

Michael Robertson Continues His Shell Game with Linspire's Missing Cash

As I mentioned last month, Michael Robertson and Larry Kettler were sued for mismanagement of the now defunct Linspire. Although I am not a party in that lawsuit, it was my hope that it would help shed some light on what happened with the millions of dollars in missing cash and other Linspire assets.

Robertson and Kettler finally responded to the suit, and I got a copy of their response. From what I could see, what they produced did not provide any meaningful data on the missing cash. It appears that Robertson simply dumped on the plaintiff over 200 pages of misc. bank statements (not even covering the full periods from Aug. 1, 2007 to present). They failed to produce any meaningful financial statements, Income Statements, Balance Sheets, closing documents on the Xandros deal, etc. From the mishmash of evidence that was provided, it IS CLEAR there were in fact millions of dollars in cash when Robertson took over as sole Board member just over a year ago, BUT it is still very UNCLEAR where that cash ended up.

Michael Robertson - What is he hiding?

The lack of meaningful financial documents in Robertson's response didn't surprise me in the least. After having worked with Robertson for over six years, I witnessed first hand all of his legal maneuvers and tricks. One of his favorites was to overload opposing counsel with meaningless discovery documents, forcing them to sift through piles of papers to find the needle in the haystack, rather than just producing the documents which clearly show he is in the right. (This is a tactic people often use when they're NOT in the right.)

If Robertson and Kettler had nothing to hide, why wouldn't they provide HELPFUL documents that show EXACTLY what happened with the cash? If there is a good explanation, why wouldn't they simply provide that evidence? What is Robertson hiding?

According to one of the documents, the new Linspire Board was made up of Michael Robertson, his wife Leslie, and Larry Kettler (Robertson's consummate "Yes Man"). Not exactly what you'd call an "independent" board. Also, I'm not sure how Leslie and Larry could be on the board, considering the shareholders were never notified of these changes. The shareholders WERE properly notified when Michael fired all the other board members over a year ago, but have not been notified of any changes since. Again, why hide this?

So, my questions for Michael Robertson are:

1. If the only financial documents you plan on providing in the derivative lawsuit are bank statements, why not provide ALL the bank statements for the periods of August 1, 2007 through the present? (I would suggest to the plaintiff's lawyers that they subpoena the bank statements for the missing periods and START looking there. If Robertson is going to force you to look for the needle in the haystack, at least make sure all the haystack is there.)

2. Why haven't you held a shareholders meeting since taking over exclusive control of the Linspire Board over a year ago?

3. Why after months of you having sold Linspire to Xandros haven't you shared any details of that transaction with the 100-some-odd shareholders?

4. Why haven't you produced any meaningful financial statements, such as Income Statements or Balance Sheets to shareholders or to the plaintiff and lawyers in the derivative lawsuit?

5. Why are you trying to dissolve the corporation so quickly without explaining anything to the shareholders?

6. What happened to all the cash? Did you funnel it to yourself and/or your father-in-law? Did you squander it all in one short year through incompetent management of Linspire?

7. And lastly... When we had to let some very good, committed, long-term employees go at Linspire, you said you wanted to only give them two weeks of severance. I disagreed, and as CEO, I made the decision to give them more reasonable severance packages. You were so greedy and upset with the CEO's decision, that you filed a bogus police report and called them all embezzlers! Your argument for giving these good employees such piddly severance payments was that you wanted to keep as much money in the company as possible, claiming this would be better in the long run for those employees, the shareholders and the Linspire customers. So, my final question for you Michael: How'd your brilliant plan work out for everyone?

Kevin

Michael Robertson Sued Over Linspire's Missing Cash

To this day, Michael Robertson has yet to explain to the 100 some-odd shareholders what happened with the millions of dollars in cash and assets that were owned by Linspire just a few short months ago. The assets seem to have completely vanished, leaving shareholders with no return on their investment or even so much as an explanation as to what happened.

In June, Robertson sold Linspire to Xandros in a back-room deal without any shareholder input or detailed notification. Even though Robertson sold Linspire three months ago, shareholders still remain completely in the dark as to the financial details of the transaction. How does that pass any smell test for investors?

Michael Robertson - Greedy, crook or just incompetent?

At the time the deal was announced, I predicted it would take a lawsuit to ever get Robertson to go public with the details, as it was my belief Robertson's motive for this transaction was likely to hide unauthorized transactions which he may have made using Linspire's assets as his personal piggy bank to reward himself and his father-in-law as well as fund his other companies. It appears I was right in my prediction as a lawsuit has now been filed against Michael Robertson and Linspire's then-CEO Larry Kettler in an effort to force Robertson and Kettler to finally explain to shareholders what happened.

Click here for a copy of the suit with all the details of the allegations.

The lawsuit is a "derivative suit" which is a lawsuit instigated by a shareholder of a corporation, not on the shareholder's own behalf, but on behalf of the corporation. The shareholder brings an action in the name of the corporation against the parties (in this case Robertson and Kettler) who allegedly caused harm to the corporation. Such derivative suits are often brought against officers or directors of a corporation for violations of fiduciary duties owed to the shareholders vis-a-vis the corporation. The derivative suit against Robertson and Kettler was instigated by Kevin LaRue, the one-time VP of Marketing for Linspire and a current shareholder, but any proceeds of a successful action are awarded to the corporation, benefiting all shareholders, not just LaRue.


Because Michael Robertson was the Chairman of Linspire's board and apparently their only board member (shareholders have never been given notice of anyone else having been added to the board since Robertson fired all the other board members over a year ago), it would be improper for him to make deals that would only benefit him as the majority shareholder. The lawsuit alleges Robertson did not fulfill his fiduciary responsibility to not only act in his best interest but in the interest of all shareholders.

Regardless of the ultimate outcome of this suit, if nothing else, it will hopefully, once and for all, bring to light what happened to Linspire. The minority shareholders have a right to know, and it's unfortunate it has taken this lawsuit to get any information form Robertson.

If my suspicions as to Robertson's actions and motives were unfounded, why wouldn't Robertson have come forward with all the books and details long before now? What is he hiding? Why is it taking a lawsuit to bring things to light? Robertson's behavior simply enforces my belief that he was in fact taking advantage of Linspire shareholders and is doing everything he can to cover up his actions.

A year ago, Michael and I disagreed over what was best for the future of Linspire and the shareholders. I resigned and Michael got his way, insisting he knew what was best for the future of the company and that he could return more value to employees and shareholders than the plans I had proposed. So far Robertson has produced nothing of value for the shareholders and the company appears now to be gone. Is Robertson a greedy majority shareholder who navigated things to make sure he got all the assets, a crook who stole the assets, or is he just incompetent, having squandered millions in one short year?

Hopefully this suit will once and for all uncover the truth and the shareholders will finally know what happened with their investment in Linspire and Robertson.

Kevin

PS: "Xandros has done more than any company to put Linux in front of users..." ~ Michael Robertson (More than Ubuntu? Novell? Red Hat? Linspire even??? Robertson said this recently. With statements like this, you can see why I have a hard time believing anything else he says.)

Michael Robertson--Where's the Linspire Cash? (Part II)

Back on July 2nd, I asked Michael Robertson to explain to the 100 some-odd Linspire shareholders what happened with the millions in cash and assets that Linspire had just a year ago?

Today I received the below "Memorandum" in the mail from Michael Robertson, "President & CEO" (and sole board member) for Linspire. (Click image to enlarge.)


It should be pointed out that "The stockholders voted..." and "...the stockholders approved a plan..." really means "Michael Robertson voted..." and "Michael Robertson approved a plan..." since the minority shareholders were not asked to give input. This is the third time, that I'm aware of, that Michael has done things by written consent, without any shareholder meeting or input. The first time was when he fired everyone from the board of directors other than himself, the second time was when he sold Linspire to Xandros, and now this time when he said he'll be dissolving Digital Cornerstone, Inc. Those are all pretty significant events to do on your own, without other board members or shareholder meetings.

According to this latest memorandum, Michael has a plan to "distribute [Linspire's] assets." I wonder what the minority shareholders will be getting? Considering I offered to purchase shares in the company at $.50 per share just one year ago, let's see how good a job Michael Robertson did in running Linspire this past year. Will the minority shareholders see more than $.50 per share? The same? Less?

Also, about a year ago, I presented a plan to Michael to have the company offer to buy back stock from shareholders at $.50 per share. Michael turned down that plan, saying that the company needed to keep all its cash to run the business. He obviously felt by keeping all the cash in the company and running the business himself, that he could make the shares worth more than $.50 per share. So, let's see how Michael performed for the shareholders. Did he turn water into wine, or into toxic waste? (From my vantage point, this is what it appears he's done this past year.)

Lastly, I'm curious how Digital Cornerstone, Inc. could be dissolved when they have ongoing litigation? Just one example is I know they are being sued by a former employee because Linspire did not honor his employment agreement.

I stand by my assessment, that the Xandros deal was all just a big ruse by Robertson to take all the assets and cash for himself, leaving the minority shareholders with nothing. I believe that dissolving Digital Cornerstone, Inc. is simply the next step in his "I-hope-everyone-forgets-about-all-of-this" plan.


Prove me wrong Michael. Anything north of $.50 per share distributed to the minority shareholders and I'll happily eat my words. Anything less than that, however, then in my mind you're either a lousy businessman (who made a bad judgment in not doing the stock buy-back plan), a thief (who took unauthorized funds for yourself, father-in-law, and/or your other businesses when YOU SAID all funds needed to remain in the company for Linspire to succeed), or you simply never intended to "take care of your peeps" all along (and just wanted to see everything go to you).

Stay tuned. I'll be sure and report back what's left for the 100 some-odd minority shareholders.

Kevin

What has Michael Robertson accomplished this past year?

I resigned from Linspire exactly one year ago on July 31st, and still no shareholders meeting or word from Michael Robertson to the minority shareholders as to what happened with their investment in Linspire.

This past year Robertson had time to predict the iPhone would flop, falsely accuse good people of crimes, shrink several companies, come up with dumb and exploitive new product names, and as recently as today, have his lawyers harass me, but he still seems to have no time for those employees and investors who wrote out checks to buy stock in his company.

Yes, Michael, we know, we know, YOU'RE #1. We got it.

Kevin

My Video Interview with Chris Pirillo about Linspire's Last Days

I've known Chris Pirillo for several years, and he's one of only a handful of people I follow on Twitter because he's ALWAYS got his pulse on the latest, coolest stuff. In following my blog, he was surprised to learn about some of the "weird stuff" that was going on with Linspire, so he invited me to his live chat room for an Interview. I tried to be as candid as possible with my perspective as to how Linspire came to an end.

Chris posted the interview in two parts...

PART 1 - Part one ended abruptly when there was a technical glitch that blew our connection up momentarily.

http://chris.pirillo.com/2008/07/03/kevin-carmony-interview-part-1/



PART 2 - Q & A - Part two was a very informal Q & A with some of the people in his chat room. You can tell I was more informal and relaxed during this part, as I end up rocking in my comfy office chair for most of this section. =)

http://chris.pirillo.com/2008/07/03/kevin-carmony-questions-and-answers/



Kevin

Michael Robertson Speaks--Intentions Revealed

Michael Robertson finally broke his silence about what the 100 Linspire shareholders can expect from the sale to Xandros. No, this didn't happen in a shareholder meeting, but to a reporter. Apparently reporters matter more to Michael than shareholders. He has time to give them a call, but apparently no time for the 100 people who invested money and years of hard work into his ideas.

Michael was quoted this morning in a San Diego Union-Tribune story. The reporter, Mike Freeman, did try to contact me yesterday, but when I called him back a few hours later, it was past the deadline, and his story had already been sent off. I did speak with Mike this morning, however, and discussed with him what I'm sharing below.

I'll comment on a few of the quotes from the story...

Robertson said that in any transaction, preferred shareholders and investors are at the front of the line to get paid.

"Any" transaction? That's certainly not true, but it does show how Michael views minority shareholders.

To further understand Michael's attitude to minority shareholders--when I was at Linspire, Michael said he wanted me to transfer $1,000,000 from Linspire's account to himself because "MP3tunes needs some money." (MP3tunes is another company that Michael owns, unrelated to Linspire, with completely different shareholders.) He also wanted me to transfer $500,000 to his father-in-law. I objected, of course, saying that the cash was a Linspire asset.

Linspire had a very good year, so we had money, and I told him we could certainly make a dividend in these amounts to him and his father-in-law, BUT that we'd also have to give the same per-share dividend to all the other shareholders as well. He said that because he and his father-in-law were "preferred" shareholders, they were "entitled" to this special dividend and that "this is a common practice in companies and happens all the time." I knew, however, that Linspire and Michael's preferred shares were not structured in that way (Linspire had two different law firms confirm that point), so I certainly never made these payments.

I guess Michael still needed the cash, and he didn't want to have any money go to the other shareholders, as he then set about removing everyone that stood between him and the money. Within a matter of days, Michael sanctioned a plan to fire the CFO and Controller. He next, without a shareholder meeting, removed myself and our CFO from the Board of Directors, leaving him as the sole member on the board. It was becoming very clear to me that Michael's plan was to see the Board, CEO, CFO and Controller gone, leaving no one to stop him from turning Linspire's assets into his personal piggy bank.

After I left Linspire, because I was fearful that Michael's intentions were to misappropriate Linspire's funds to himself and his father-in-law, I had my attorney arrange for me to review the Linspire books. Michael refused and his lawyers pushed back my requests. To this day, even though I'm a significant shareholder, I have not been allowed to see the books, nor has Michael held a shareholder meeting.

When Michael realized I was putting up road blocks to prevent him from just reaching in and taking out cash, even after all the officers had been removed from his way (and him going so far as to falsely accuse good people of embezzlement for accepting reasonable severance payments), it appears he set out on a new course of action to get at the cash...liquidation.

Every company has different rights for preferred and common shareholders. At Linspire, the liquidation rights of the preferred shareholders were very weak (see S1), being not much different than those for the common shareholders. The difference in liquidation preferences between common and preferred shareholders at Linspire is very small, and it appears Michael set about structuring everything to navigate all the cash from Linspire to him, through that tiny space of differentiation. (It may apparently take a lawsuit to uncover if he was successful in that operation.)

He said he couldn't get into specifics of the deal or say whether anything will be distributed to minority shareholders.

Not even with the 100 shareholders? By law, he will be forced to "get into specifics" to those of us who have invested and hold shares in Linspire.

“I personally have invested more than $20 million in Linspire,” Robertson said.

Pure nonsense!

An investigation in the public documents filed with the SEC can give anyone insight into what Michael has invested. Michael invested equity into Linspire and, at times, extended it loans. Before I left, Linspire had paid back any and all loans to Michael, and the company still had millions of dollars of retained earnings in the bank. Michael's EQUITY investment into Linspire is nowhere close to $20M! In fact, at no point in time was Michael's equity investment COMBINED WITH HIS LOANS anywhere close to $20M. This would be like me loaning you $10 every day for lunch, you pay me back in full at the end of each week, and then 7 years later I say "I invested $18,200 in you!"

“It's important to know that when there are distributions, the investors always get their money back first, and if there's nothing left over it's not a devious plan to screw shareholders."

So, let's get this straight Michael...the tens of thousands in CASH that employees "invested" into Linspire when they purchased their stock doesn't count, but your cash does? You're an "investor," and they're all just peons to be taken advantage of? Do we not even warrant a shareholder meeting? You said you invested $20M--is that the number you're using to cut first in line? What deal did you structure to navigate your weak liquidation preferences through to the cash? Was this a "liquidation, dissolution and/or winding up of the Corporation," or was it an "acquisition of Linspire" as stated in the press release. Will there be a distribution, or will we be writing off our investment in Linspire? Can you blame shareholders for finding you "devious" when you don't hold annual shareholder meetings, refuse to let us review the books, and then liquidate the assets without sharing any information with us about the deal and how it effects us? WHEN WILL YOU HOLD A SHAREHOLDER MEETING AND ANSWER THESE QUESTIONS???

"It's the way it works.”

No, Michael, it's the way YOU work. Hopefully prospective investors in any Michael Robertson ideas are paying close attention.

If you ever find yourself on a boat with Michael, and it starts to sink, don't be surprised if you spot him pushing women and children out of the way as he scrambles for the only life boat, screaming "I'm first in line!"

Kevin

PS: On a minor point, Hoovers was wrong in their quote of $3M in revenue and 18 employees. Revenue is 2007, the year I left, was substantially higher than that, and departing employees have said that Linspire has around 8 employees left today.

Also, Xandros claims to be the 3rd largest Linux company and largest privately held one. Well, you'd have to ignore IBM, Intel, Nokia, etc. who probably employ more Linux engineers than Linspire, Xandros, Canonical, Mandriva, etc. combined and limit it just to Linux distro companies. I'm quite sure Canonical (Ubuntu) is larger than Xandros in terms of employees, users, and I'd imagine revenue as well. As for impact on the space, that's not even close.

Michael Robertson--Where's the Cash?

Linspire Shareholders,

When I left Linspire there were lots of assets in the company (computers, furniture, servers, trademarks, employees, and millions in cash), and virtually no liablities. What happened to these assets and cash?

I have been contacted by several Linspire employees and shareholders, asking me what the Linspire asset sale to Xandros means. I put together this short video using "buckets" to try and explain what happened in very simple terms, based on what information was provided in the 3-paragraph "memorandum."


Since Larry and the other employees now work for Xandros, Michael appears to be the only remaining employee of Digital Cornerstone, Inc., the company we now all own shares in.

So, Michael, the shareholders want to know...

1. What assets remain in the company?

When I left, there was a lot of cash in the account. I assume this has grown, since you sold off the other assets to Xandros.

2. What is the value of our shares?

When I left, I offered $.50 a share to buy stock in the company. The shareholders are all curious what their stock is worth today, ten months later. Have you grown or shrunk the company since then? You always told us to trust that you would take care of the employees and shareholders. Time for you to honor that trust.

3. Since all the assets have now been sold, how do we cash in our shares?

Perhaps Michael is hoping we'll all just forget about "Digital Cornerstone, Inc." and he can keep all the assets for himself? Perhaps he'll use some clever legal maneuver to make sure the 100 shareholders never see anything for their investment in Linspire? Perhaps instead of cash, we now all own Xandros stock or shares of Michael's other companies (both worthless in my opinion).

Without Linspire ever holding shareholder meetings, we remain in the dark, and left to speculate.

Here are just some of the many employees who worked for Linspire over the years (as found on the Linspire website from a Linspire Letter), many of which paid cash to exercise stock options and are now shareholders. Michael asked them all to "trust him."

I have no intention of forgetting, as I'm sure is the case with many other shareholders. I would suggest that Michael Robertson hold a shareholder meeting ASAP to answer these questions.

Kevin

Xandros Acquires Linspire Assets in Secret Back-room Deal

Today, as a Linspire shareholder, I received the below "memorandum" from Linspire. I have confirmed with several other Linspire shareholders that they too received this same notice.

In classic Michael Robertson form, he has once again completely disregarded the 100 some-odd shareholders of Linspire by pulling off this deal without a shareholder meeting. Most states require shareholder approval of any merger or reorganization of a corporation, or the sale or transfer of all or substantially all of the corporation's assets. Regardless of state laws, common decency would dictate that even if a company only has 1 minority shareholder, there should be a shareholder meeting and the acquisition explained to all shareholders. What do Linspire shareholders get in place of a shareholder meeting? This completely worthless notice in the mail.

Why would Linspire pull off a midnight, back-room sell-off without a shareholders meeting? I'd ask them myself, but they haven't returned emails from me in the last ten months, and since they didn't hold a shareholders meeting in this matter, one is only left to speculate. So, here's my speculation...

This will end up being a completely insignificant event for Linspire shareholders and the end for Linspire customers. I predict this was done to: 1) help Robertson drain the company of its cash and resources. When I left Linspire, we had a very profitable year and the company had millions in the bank. I predict Robertson has moved this money to himself, family, and his other companies, leaving Linspire's minority shareholders with nothing. 2) help Robertson save face by issuing a "Linspire Acquired by Xandros!" press release, instead of living with the public humiliation that Linspire failed under his leadership. (Although, being out lasted by Xandros isn't much less embarrassing.) Such a press release will of course be meaningless unless the acquisition was substantial. As a shareholder, I will eventually find out. 3) Give Xandros a press release and perhaps some way for them to spin this to investors to raise money.

Just watch...this will not be good for Linspire's customers, partners or minority shareholders. I'd love nothing more than to be proven wrong! We'll know as soon as I hear what my stock is now worth.

Ten months ago, I offered Michael to purchase stock in the company for around $.50 a share (in cash). When we find out how much my stock is now worth, after this "acquisition," we'll see just how brilliant of a businessman Michael Robertson was. Let's see how much the value of that stock has changed in the short ten months since my departure. If I get more than $.50 for my shares (in cash, not some bogus, inflated valuation based on Xandros stock), then I'll be very happy and I'll be pleased with what Robertson and Kettler have done with the company. If it's worth a lot less than that, then I'll be very unhappy and it will show just how incompetent (or plane dishonest) Robertson and Kettler are.

To me, this looks like Michael, the "captain" of the Linspire ship, sees the boat sinking, so he casually tells the passengers on the ship that he's just going on a quick supply run, jumps on the only life boat with any cash and valuables he finds, paddles off to safety, and leaves everyone else behind to sink. Pathetic. I left Linspire with millions in their bank account and a plan, but Robertson and Kettler seem to have destroyed it all in ten months.

So, Michael, now that all the assets have been sold, what's my stock worth (again, no worthless Xandros stock please**), and what will happen with Linspire's customers?

Something tells me it will take a lawsuit to find out.

Kevin

**PS: Before Linspire and Xandros try to spin this into something actually positive, I'd like to offer my Linspire shares to either Michael or Andy Typaldos (Xandros' CEO) for $.10 a share. That's 80% less than what it was worth just ten months ago. If this transaction happened at a good valuation, then I'm sure Michael and/or Andy will be all over my offer, right? I'll post here when they accept my offer. Don't hold your breath.

Why Won't Linspire, Inc. hold a Shareholders Meeting?

When I served for six years as Linspire's President, and later as CEO, one of the things I took pride in was our solid management team. Organizationally, the company was buttoned up from top to bottom. We had a top-notch finance team that made sure we always stayed on top of our accounting, audits, financial statements, and compliance to shareholders with properly scheduled and documented board meetings and annual shareholder meetings. Since leaving Linspire, this practice seems to have ended.

I hold quite a bit of Linspire stock, and one of my biggest concerns when I resigned from Linspire back in July of last year was that Michael Robertson, and whomever he chose to appoint as the new CEO, would not have this same awareness and concern for the dozens of Linspire shareholders that I had.

Quite some time back, Linspire became delinquent in holding their annual shareholder meeting. I have twice emailed them asking what the status of this was (once in January and then again in March) and have not received any response.

Linspire has around one hundred shareholders, and the fact that Linspire management fails to comply with their responsibility to these shareholders is an unfortunate sign and does not bode well for those of us holding Linspire shares with no voice or oversight. My opinion of Michael Robertson is he plays fast and loose with rules, regulations and laws. It would appear my opinion is validated in regards to Linspire's responsibility to shareholders. Michael Robertson, as Chairman of Linspire's board, and Larry Kettler, as Linspire's CEO, should comply with their responsibility to shareholders and immediately hold their annual shareholder meeting. As it stands now, shareholders are left in the dark as to Linspire's plans or financial stability.

This is just one of the many things I know of happening at Linspire which lead me to believe Linspire is struggling, which is not encouraging for Linspire shareholders or customers.

Kevin