Coming from the recent AIPAC convention, we heard a lot about the similarities between the United States and Israel; our two societies, struggles and endeavors are irreversibly interconnected, and therefor reliant on the other. Of course, there are areas of similarity and then there are areas of vast difference, and if you heard House Speaker Paul Ryan say it, neither country is perfect.
For the sake of time, I would call attention to one place where a situation in America just may affect at least 75 people in Israel – an area where the laws in the U.S. can have an adverse impact on jobs in Israel, and it may happen any day now. If President Donald Trump wants to make sure jobs stay in America, he should pay attention to what is happening in Delaware. Similarly, if you listen to Prime Minister Netanyahu warning about the loss of tech jobs in Israel, he may want to push for American lawmakers to pay attention to that very same Delaware issue.
Let me call your attention to Milim Technical Writing and Translation, which is owned and operated by an American firm registered in the state of Delaware, TransPerfect Global, an international translation technology firm. TransPerfect has offices in about 90 cities worldwide, close to 3,800 employees and 75 of them being in Tel Aviv, Israel. Those jobs may now be at risk.
Due to a fight between the company’s two owners, Philip Shawe and Elizabeth Elting, the Delaware business Chancery Court has determined that the company must be put up for sale. Logically, when another similar entity, or a financial fund takes over, they generally look for ways to cut staff and reduce overhead. That means the 75 jobs could be reduced, moved to another office or country or just outsourced to a help center in India. I bring this up because the court decision is simply not necessary and could even be biased, and no one with any power to change it is paying attention.
Elting owns 50%, Philip Shawe owns 49%, and his mother Shirley Shawe owns 1%; that was designed to help the company win contracts as a female owned company, which all parties have benefited from. In 2013, Elting decided she could no longer work with the Shawes and filed a lawsuit to force the company up for sale. That in of itself was an oddity, as Elting has always held the right to sell her own half of the company anytime she wants, and she appears to have never asked Shawe to sell her his shares. Using the court like this looks like a strategy to meet one outcome only – to force Shawe out whether Elting ends up owning the company or not.
Delaware business law suggests that if a company in in deadlock and at risk of, or in bankruptcy or some form of financial distress, the court could install a custodian to break deadlock and force the company to sell. If you read the court decision, one can readily see that the business court’s head Chancellor yielded heavily toward Elizabeth Elting, even though she has the weaker argument. Then subsequent decisions, penalties imposed and even an attempted appeal argument by Harvard professor Alan Dershowitz were rebuffed by the court system bent on siding with one side regardless of law. It would seem difficult to believe, but the highly-esteemed Chancery Court in Delaware, that many consider to be the gold standard in business law, may very well be clouded.
Elting and Shawe started the company in 1993 and ran it together for some 20 years before the lawsuits to break up the company were filed. Eliting claimed Shawe was an impediment, and that there was hopeless deadlock; yet the company has generated its highest revenues ever during these tumultuous times. The Chancellor cited fear that the company may fall one day in the future, and that he needed to preserve its valuation today, yet he recognized the continuous high earnings. So, he was saving a company that did not need saving in case one day it might.
To find a solution, Philip Shawe made an offer to buy Elting’s half for $300 million. He offered a guarantee and four-months for Elting’s team to find a higher offer, but she and her lawyers ignored it and the courts rejected the offer, calling it “frivolous”. They did not make a counter, nor did they suggest a price they would sell it for, and the Chancellor seemed intent on claiming Shawe was the hurdle – if you repeat a lie often enough, it becomes the truth to some people.
Meanwhile, the custodian installed by the Chancellor to watch over the company has racked up millions of dollars in fees. Between his own hourly rate and those of the consultants the custodian appointed to set TransPerfect up for sale, the company has paid nearly $15 million; not in building new clientele, not adding technologies and not adding new offices, but merely paid in fees to assess the value and find buyers. That’s quite an incentive to keep the trough full. Perhaps Delaware’s judiciary may be mirroring some of darker exploits within Israel’s public sector.
In the hopes of ending this lawsuit, Shirley Shawe offered to vote her 1% with Elting to keep the company from ever falling into hopeless deadlock, which was the reason for the court’s decision in the first place. No one responded, and it will again head to the Chancery Court. That fact alone should demonstrate the intent of the lawsuit and the motives of some of the parties here.
Shawe has been loud and angry, and Elting has been quiet as each and every decision has fallen in her favor. The judge may be exercising emotion over sagacity, as he references unfounded allegations of harassment by Shawe of Elting dating back to the 1990s – even while they ran the company together, problem free and successfully. In the initial trial, Shawe brought dozens of character witnesses. Elting had zero. Shawe had hundreds of employees file affidavits the courts. Elting had none. The court took her word over countless others saying the opposite.
This decision, as convoluted as it can be, may very well cause the company to be sent into turmoil. I care and so should you because there are good jobs in Israel. It may seem insignificant, but for a small country, 75 working people means so much.