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Rambus' board and the CEO's wife

Employees of public companies--and their spouses--should stay away from investor forums. It's just too easy to cross the line.

Rambusneeds more controversy and scandal like the Internet needs more bloggers and porn. As mired in legal trouble as this company is, you've really got to do something egregious to get noticed.

According to a story by The Recorder, a California legal paper, the wife of Rambus CEO Harold Hughes did just that. Nancy Hughes anonymously posted 170 messages on a popular investor message board over a 10-month period. In her posts, clarissamehitable--alias Nancy Hughes--vigorously defended her embattled husband, and criticized current and former members of the company's management team.

Nancy's posts were so obviously those of a Rambus insider that they aroused not only the suspicion of other posters on the board, but company officials, as well. Rambus brought in outside legal counsel to head up an investigation, which ultimately turned up none other than Hughes' wife.

According to a company spokeswoman, Rambus' board of directors concluded that there was no wrongdoing on the part of either Hughes.

What's troubling is that Nancy was pegged as an insider for good reason. If some of her posts were not inside information, they certainly appear to come razor close to crossing the line. And there's evidence that someone may have removed some of her posts from the message board.

Full disclosure:
I was an executive officer of Rambus from 2002 to 2003 and I am a shareholder. I have never posted on an investor message board and neither has my far as I know.

The story:
There was a time when Rambus - the Silicon Valley company everybody loves to hate - had the personal computer industry by the cohones. The company went public in 1997 based in part on a deal with Intel that would make Rambus' patented technology standard in all PCs. In 2000, the company boasted a $12 billion market cap on $72 million in revenue and a $106 million net loss.

When the deal unraveled, the company turned to litigation against companies it claimed stole its patented technology. But Rambus wasn't as good at litigating as it was at developing technology; its failings in America's courts have become the stuff of legend, conspiracy theory, and nightmares for employees and investors. Adding to the company's woes, last year the Federal Trade Commission overturned a ruling in Rambus' favor and found the company unlawfully obtained monopoly power.

Courtroom drama aside, the impact of Rambus' innovation is unassailable. The company's patented technology is critical to the performance of all kinds of electronic products, from PCs to HDTVs to PlayStations. But the company also boasts some of the most active, knowledgeable, and opinionated shareholders ever to flame a message board.

The Rambus message board, which began a year ago with a mass exodus from its longstanding home at Yahoo, boasts hundreds of posts per day from investors with colorful names like croaker_frog, dodgemyshadow, fraudbus, JustMyOpinionNotThatItMatters, nictherealgreeksalad, and the ever popular spongebobstockpants.

To be sure, these folks don't pull punches. Here's a typical post:

Hughes and Co. will f**k it up like they have everything else with this stock. Can't wait until the shareholders meeting so I can call him a dumbass to his face. If he is CEO material, that means every Tom, Dick & Harry a--hole can too. No wonder Intel got rid of his ass.

Excuse the French, but that's the way it is. It's enough to unnerve even the toughest executive's spouse. But, in her well-meaning, if not unwise, zeal to get Rambus' investors off her husband's back and to stick with the stock, Ms. Hughes may have crossed an ethical, if not a legal, boundary.

In one post, Ms. Hughes responded to speculation that Rambus receives $20 in royalties per Sony PlayStation3:

Hope everyone will get off this $20 per PS 3 soon. Totally pie in the sky. However, something in the range of $4-5 would be in the ballpark.

Also, an hour before Rambus' third quarter 2006 earnings call, Nancy responded to this post: Is $10 million less than last quarter "decent revenues"? with the following message:

I think you may be surprised. JMO

Indeed, the quarter did come in quite a bit higher than the poster's conjecture. Nancy also delivered what sounds like a definitive statement on possible settlement talks:

...I'm reading the tea leaves differently from you with regard to settlements. I haven't seen anything that would bring the parties to the settlement table. Talks aren't happening and settlements aren't imminent. JMO...

Just wondering, does writing JMO (just my opinion) after making a statement mean you're off the hook if that statement turns out to be inside information?

Then there's Qimonda, the DRAM-focused spin-off of Infineon. Rambus and Qimonda announced a deal on January 3, 2007. Following is dialog that occurred between one poster--dotbot--and clarissamehitable after the announcement:

dotbot: What department in Rambus do you work in?

clarissamehitable: I don't work for rambus

dotbot: Sorry I dont [sic] believe you. Your posts give it away. Calling the qimonda deal the night before it was released makes it a bit obvious.

There was at least one other reference to clarissamehitable calling the Qimonda deal in advance of the announcement, but when I searched for messages to that affect, there were none. Two message numbers from that timeframe, however--#48994 and #49004--were mysteriously missing.

This is just conjecture, but realizing she may have crossed a line, is it possible that Nancy covered her tracks by deleting the messages? I wonder how many of us would do the same thing in her shoes?

Then there's Nancy's feistier side where she criticizes former general counsel-turned-senior legal advisor John Danforth, writing he "...artificially raised expectations of the possible monetary rewards we might expect from successful litigation, " and that he is "...probably an obstructionist from a business standpoint."

And in reference to the company's former CEO, president, and CFO, Ms. Hughes wrote, "...glad that Tate, Mooring, and Eulau have been shown the exit door."

Of course, I'm just providing chosen quotes to make some points. If you read her posts, and I encourage you to do so here, you'll find an eloquent, intelligent, impassioned, and loyal woman intent on defending and supporting her husband and his company.

In my view, she succeeded all too well. And that, along with her methods, raises a number of ethical questions.

Although neither she nor her husband profited directly from her actions, and she may or may not have shared inside information, she did seek to surreptitiously influence the company's shareholders. Do you think that crosses an ethical line?

In addition, she criticized current and former members of the management team, potentially straining the relationship between her husband and members of the board who may not share her opinion on those they worked closely with for many years. Again, was that ethical?

According to a company spokeswoman, Harold had no knowledge of his wife's activities. That raises a different type of question: if you were a CEO, how would you feel if your wife did what Nancy did behind your back? I don't know about you, but I would have a real problem with that.

That said, I admire Nancy's intentions and agree with many of her views, including some of the more controversial ones. But she's too much of a risk-taker for me. It has always been my view that, tempting as it is, employees (and now I would add their spouses) of public companies should stay away from investor forums. It's just too easy to cross that line.

And these days, it's a good idea to stay far, far away from those ethical lines.