This past Thursday, Motient Corporation filed a Form 8-K that attempted to characterize me as the
villain in what has certainly been a bumpy road for Motient over the past few months. Motient’s
one-sided, self-exonerating public statements reveal your new strategy to shift the blame to me for
your recent problems, thereby clearing a path for management and the Board to continue forward with
their own self-serving agenda.
Although I am disappointed, I cannot say that I am surprised. I have become accustomed to being
the party-spoiler in refusing to cover up your inappropriate actions, your fiduciary breaches and
your divided loyalties that continue to adversely affect Motient and its stockholders. Based on
your public statements, however, I believe I should set the record straight so that the
stockholders can get a clear picture of what is actually going on here.
My “Baseless” Allegations and Our Audit Committee
Motient finally publicly disclosed in its recent public statements that its Audit Committee has
been conducting an internal investigation since July 2005 of various allegations that I have
asserted against other Board members, consultants to Motient and third parties. As you know, I
raised these concerns directly to the Audit Committee, together with a long list of questions
regarding past actions by these persons and entities, in an effort to address and correct these
problems through Motient’s internal corporate governance procedures.
From the outset of this purported “investigation,” I was told that my list of questions was overly
broad and did not include sufficient facts to support my allegations. I consistently
responded that it was the duty of the Audit Committee to conduct a thorough investigation of these
questions and to uncover the facts supporting my list of concerns. In spite of numerous requests
for information and status updates, the Audit Committee provided neither and slowly went about its
business, saying that their work could take up to six months to complete. Assisting the committee
was their “special independent counsel,” a firm recommended by Motient’s general counsel that later
admitted to assisting Motient with various past legal matters, raising questions as to its actual
independence.
Motient now seeks to put an end to this investigation by pronouncing my claims to be “inaccurate,
baseless, and unsubstantiated.” To date, neither I nor the entire Board of Directors have seen a
formal report of the Audit Committee or any evidence of what occurred in this investigation. At no
time prior to these public statements was the Board informed that this investigation was complete.
At no time was information provided to the Board that supported the conclusions reached by this
“kangaroo court.” Again, it appears that the deliberation and discussion process required for
Board action under Delaware law was not followed. Therefore, I believe that individual Board
members must immediately be provided with a copy of the report discussing the process, the facts
discovered and the specific results of this investigation. Specifically, the report should address
the Audit Committee’s findings regarding the apparent conflicts of interest, fiduciary lapses and
excessive payments that are sprinkled throughout this company’s history over the past two years. I
also demand that a Board meeting be convened to discuss this report after sufficient time is given
to the Board members to digest this information.
Highland’s Lawsuits
Due to the mishandling of these matters by Motient’s Board of Directors and the continuing
conflicts of interest orchestrated by the Singer brothers, Highland Capital Management decided in
late August to commence litigation against Motient, its other directors and several conspiring
third parties on behalf of itself and all other stockholders. Through this litigation, Highland
intends to ensure that these allegations of fiduciary misconduct are properly investigated and
pursued. Until this is completed, we have no intention of dismissing any of these lawsuits. In
fact, we filed a fourth lawsuit against Motient on Friday in Delaware seeking to enjoin the
exchange offer that Motient has recently commenced in an attempt to cure its April 2005 issuance of
void preferred stock. We intend to argue for this injunction on the grounds that Motient’s actions
are coercive to stockholders and that the related exchange offer materials fail to provide adequate
disclosure to stockholders.
In due course, Motient and the current Board members will be required to answer the questions that
we have raised, including, among others, the following:
Was it appropriate for Motient to pay Tejas Securities, a tiny Austin-based securities
firm, tens of millions of dollars in placement fees to assist Motient with its past
private placements, especially considering that these sales were primarily to existing
insiders? Was there any competitive bidding involved in the selection of Tejas
Securities?
•
Was it appropriate for Motient to pay Jared Abbruzzese (a Motient director for much of
this time; now the Vice Chairman of Tejas Securities) and his consulting firm CTA millions
of dollars in “consulting fees” to advise Motient through this process, including the
advice to hire Tejas Securities?
•
Isn’t it odd that Tejas Securities and CTA mysteriously merged their businesses in May
2005 after collecting all of these fees from Motient? Shouldn’t there have been more
disclosure in Motient’s public filings of these connections?
•
Is nobody else uncomfortable with the fact that Gary Singer, a convicted felon barred
by the SEC from ever serving as a director of a public company, has been heavily involved
(and paid) in orchestrating the management of Motient for the past few years?
•
Does it not make others uncomfortable that the so-called “independent” directors of
Motient and senior management of Motient have a web of connections with the Singer
brothers and Mr. Abbruzzese?
Alleged Factual Inaccuracies
Motient’s recent public statements also contain various ad hominem attacks on Highland. Moreover,
they urge me to address certain “inaccurate statements and factual errors” that Highland and I
allegedly have made in pursuing my concerns. Based on the list of items that you have presented,
it would appear that you are trying to impugn our integrity and motives through spurious
allegations about immaterial facts. Set forth below are our responses:
•
Highland Share Ownership
•
Your Allegation: You claim that Highland misstated its aggregate share
ownership in Motient when Highland reported its ownership at approximately 14%.
The Truth: Highland and its affiliates have correctly reported on
multiple occasions that their aggregate beneficial ownership of Motient’s
common stock is approximately 13.6% of the outstanding shares of common stock based on
Motient’s most recently published Form 10-Q. Highland has calculated this
percentage in accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, which requires Highland to include in this number any shares owned
directly as well as any shares that may be acquired within 60 days through the
exercise of any warrants or through the conversion of convertible securities.
•
Public MSV Financial Statements
•
Your Allegation: Highland incorrectly stated that MSV does not have
audited financial statements when such financial statements were included in
Motient’s last Form 10-K.
•
The Truth: Highland acknowledges this error in its September 29 letter
to Mr. Downie and regrets any confusion that it may have caused. Highland’s point
was simply that MSV is not itself a public company and does not make its own
periodic filings with the SEC.
•
MSV’s Access to the Public Markets
•
Your Allegation: Highland inaccurately stated that MSV has no access
to the public markets under the rationale that “Motient is not the only public
investor in MSV.”
•
The Truth: I think you missed the point. We simply criticized the
proposed MSV/Terrestar transaction in that it provides a public market for MSV
equity holders that is currently not available and that Motient is being used to
gain access to the public markets. This enhanced liquidity and related market
access do not seem to have been considered in the valuation process related to the
proposed transaction.
•
Board Consideration
•
Your Allegation: You state that (i) there were multiple “meetings” at
which the proposed transaction was discussed, and (ii) that my representative
attended “the meeting.”
•
The Truth: The only meetings that either I or my representatives
attended addressed the proposed transaction as if it were a done deal. There were
only general descriptions of the deal and its terms. When pressed for greater
detail, no information was provided. In fact, the final term sheet was only
provided to us after the Form 8-K announcing the proposed
transaction was released to the public. While Motient may have viewed these
discussions as being satisfactory to “check the box” for corporate compliance
purposes, my previous statement was that such a substantive corporate action
deserves a more thorough and meaningful discussion and analysis by the Board.
Nominating Committee Actions
Motient’s public statements also reveal that its Nominating Committee has been engaged in an
investigation of whether I disclosed to any third party any material non-public information that I
obtained in my role as a member of Motient’s Board of Directors. I reconfirm to you that neither I
nor my representatives have disclosed any material non-public information regarding Motient to any
other stockholder or any third party nor have I breached my fiduciary duties to Motient or violated
any laws or regulations.
Your reference to litigation by Joshua Wheelock (a former UBS trader) against Highland also is
misleading and irrelevant to the issues being raised. Mr. Wheelock seeks relief from Highland in
connection with claims surrounding his departure from UBS and is not alleging that either I or
Highland engaged in any insider trading or disclosed material non-public information in violation
of securities laws. Again, it appears you are attempting to focus attention on matters that have
no relevance to the issues raised in the Highland litigation or in my series of correspondence with
the Board as a means of distracting stockholders from your actions. This is consistent with
Singer’s behavior in the CooperCompanies investigation. Are Gary and Steven again
pulling the strings here at Motient?
It is ironic that you accuse me of taking actions that unnecessarily draw upon corporate assets by
pursuing baseless actions when that is true of this Board. Your allegations against me and the
half-baked investigation by the Nominating Committee are without merit and are merely an attempt by
Motient’s management to deflect attention raised by my claims and to keep me uninformed about the
proposed disguised sale of Motient. How can this be in the best interests of Motient stockholders?
Highland Capital and its Alleged Litigious Background
In your public statements you also suggest that Highland’s motives are tarnished because of
Highland’s litigious history, a history that was never fully disclosed to you. Again, your ad
hominem attack against Highland also appears to be intended to shift the spotlight in this matter
from yourselves to me.
As you know, Highland is an SEC-registered Dallas-based investment advisory firm that manages
approximately $16 billion of capital. The vast majority of our investments are
in the form of senior secured debt of U.S.-based companies. Over the years, many of the debt
issuers in which Highland has invested have filed for bankruptcy and Highland, like other similarly
structured distressed investment managers, has simply sought to protect its interest (and others
who are similarly situated) through the U.S. bankruptcy system and through court proceedings. This
is common practice for like-minded managers.
Of the 53 suits that you actually list (note that your list includes several duplicate listings),
the vast majority relate to bankruptcy-related proceedings arising from Highland’s normal
distressed investment-related activities. Highland views these actions as evidence of its resolve
to maximize value for investors when faced with bankrupt issuers. The remaining suits listed in
your public statements involved matters that Highland believe arose in the ordinary course of its
business, including (i) personnel issues at Highland, (ii) trading disputes with brokerage firms
and (iii) vendor disputes. In fact, your list of litigation matters included suits in which my
name was merely mentioned (and I was not even a party). Again, what purpose are you seeking to
achieve by disseminating this sort of misinformation? None of the suits involved a derivative or
class action claim with a company in which Highland held an equity interest.
You also argue that I failed to disclose all of these past matters to you. I have disclosed on
numerous occasions that Highland has been involved in various matters arising in the ordinary
course of its business. If it was so important to Motient that Highland had commenced litigation
over various of its investments and if it is something that Motient did not know (which I
question), Motient could have easily discovered this information by undertaking normal diligence
measures. The fact that Highland is a party to various proceedings demonstrates its commitment to
its investors and its desire to maximize potential investment returns. These are all goals that
should be synonymous with what management of Motient is attempting to achieve for its stockholders.
Unfortunately, this has not been the case. If you really want to disclose relevant litigation,
consider Gary Singer’s felony conviction for securities fraud or the investigation of Steven Singer
in the Cooper Companies matter.
Public Confusion
The stockholders of Motient must be wondering about Highland’s motives. Why would the largest
stockholder of Motient (i) be suing Motient, and (ii) be suing the Board for past actions during
times when I also served as a director? I assure you that this is not a case of retaliation for
being removed from the Compensation Committee, as you suggest. Does that even make sense given the
size of our investment? The simple answer is that we believe strongly in Motient’s business and
its prospects, but we no longer believe in Motient’s current leadership. In fact, we believe that
Motient is being harmed by its current management and Executive Committee to the detriment of its
stockholders, including Highland, and that these fiduciary lapses should be rectified. After years
of
trying to work with this management team through one disagreement after another, we decided
to shift our strategy to one that more forcefully seeks to rectify the inappropriateness of this
Board’s past actions and to prevent future actions that conflict with the best interests of Motient
stockholders.
In your public statements, you remind me that I “owe all Motient stockholders a duty to act, at all
times, loyally, with due care and in good faith to promote the best interests of those
shareholders, and may not place [my] own interests or those of [my] affiliates ahead of [my] duties
as a Motient director.” I accept these fiduciary duties and believe that I have fulfilled them at
all times. I suggest, however, that you look at yourselves in the mirror when reminding me
of my duties, as it is you that have strayed out of bounds.
