History of Executives

During the period in which the stock of TerreStar rallied and then subsequently fell, Steven Singer was the acting Chairman of the TerreStar Board of Directors. According to a letter to TerreStar stockholders from a significant investor, Singer ran the Company with “a group of hand-picked insiders, which includes other sitting directors, executive management and affiliated consultants and industry service providers, including Jerry Abbruzzese.” The letter also alleged that during this period Steven Singer shared an office with his brother Gary, who “negotiated deals on Motient’s behalf, participated in Motient’s board meetings and indirectly received over a million dollars in fees from Motient.” (Source for preceding paragraph: Filing from secinfo.com)

Prior to his involvement at TerreStar, Gary Singer was convicted and found guilty of 21 counts of racketeering, money laundering, and fraud while he was chairman of The Cooper Companies. For his role in this scheme Gary Singer was sentenced to 28 months in prison and barred by the SEC from serving as an officer or director of a public company. Notably, Steven Singer was the Chief Administrative Officer of The Cooper Companies during this period.

Corruption in the Singer family is not limited to Gary and includes his father Martin Singer. Martin Singer was, according to the New York Times, “a major school-construction contractor in New York” starting in the late 1950s who was described by state and Federal law-enforcement officials as “a contractor who knew his way through the corridors of corruption at the school board.” Martin Singer died in October 1993 after pleading guilty to tax evasion charges in 1992. (Source preceding two sentences: New York Times Article from May, 1994)

Gary Singer has a history of doing business not just with his brother Steven, but with Jared Abbruzzese as well. One such example involves the creation of CRT Satellite Investors LLC and Digital Satellite Lenders LLC, both of which were investment vehicles for Gary Singer, Abbruzzese, and others. (Source for preceding paragraph: Press Release Regarding WSNet Bankrupty)

CRT and Digital Satellite Lenders were primary investors in WSNet, a private cable operator for which Jared Abbruzzese was acting chairman and CEO. WSNet filed for Chapter 11 bankruptcy protection in 2002 and later became the target of a lawsuit containing certain allegations regarding their use of the bankruptcy process to shield themselves from existing derivative claims. According to press reports, WSNet filed for Chapter 11 protection shortly after Digital Satellite Lenders “cleaned out” WSNet’s bank account. It was also noted that Abbruzzese was “closely affiliated” with WSNet’s lender, Digital Satellite Lenders. (Source for preceding paragraph: Press Release Regarding WSNet Bankrupty)

Furthermore, claims were made against Abbruzzese and Gary Singer that are quite similar to those that would be made later by a significant shareholder in regards to the duo’s involvement in TerreStar. Allegedly, WSNet was “mired in a complicated web of self-dealing by some of its top officers, who also happened to be principals in the company’s biggest lenders.” Also, it was alleged that Gary Singer, “although not an officer of WSNet, was installed as a key decision-maker at both the officer and director level” and that “Digital Satellite Lenders neglected to inform other shareholders of Singer’s criminal record.” The similarities between the WSNet case and TerreStar are striking. (Source for preceding paragraph: Press Release Regarding WSNet Bankrupty)

As it turns out, Jared Abbruzzese had a checkered history even before his involvement with WSNet. According to a press report, In 2002 Abbruzzese was found guilty of fraud in Texas. The verdict was later overturned by an appeals court and Abbruzzese, without admitting guilt, eventually settled out of court. (Source for preceding paragraph: Article by James Odato from Albany Times Union)

Two former executives of companies that had been acquired by Abbruzzese’s CAI Wireless filed the suits, which alleged that Abbruzzese “deceived them by persuading them to forfeit stock options Abbruzzese allegedly knew could soon become extremely valuable.” The options did, in fact, become extremely valuable. WorldCom purchased CAI Wireless for $414 million, or $28 per share, soon after the two executives had left the company for a modest severance package. Their options would have allowed them to purchase the stock at $0.87 per share. (Source for preceding paragraph: Article by James Odato from Albany Times Union)

The litany of allegations against Jared Abbruzzese runs even deeper, and includes an FBI probe into Abbruzzese’s relationship with Joseph Bruno, the New York State Senate majority leader. Abbruzzese was an investor in Empire Racing Associates, which was bidding to gain control of New York’s lucrative horse racing franchise. Abbruzzese allegedly gave improper gifts such as flights on his private jet to Bruno, purportedly to garner favor with respect to the awarding of the horse racing franchise and the distribution of state funds. (Source for all claims in preceding two sentences: New York Times Article from March, 2007)

It is important to note the above history and relationships amongst these men to understand the allegations against TerreStar. (Also see: web of relationships Exhibit 1 and Exhibit 2) The precipitous drop in the value of TerreStar can be partially explained as a function of its leadership being unwilling or incapable of adequately or properly managing the Company’s assets.

The following areas are where the leadership of TerreStar has specifically and most egregiously failed the Company since its emergence from bankruptcy in May of 2002:

– Conflicts of Interest and Board Self-Dealings

– Counterproductive M&A Activity

– Governance Failures including Outsized Compensation Packages that Enriched Executives

– Poor Operational Management

– “Empire Building” Burned Cash and Led to Need for Layoffs in 2008

<<previous | next>>