H Quotient, Inc. (fka HQNT)

[Sonyboy]

Financeguy, I must give you credit for guts in trying to defend the indefensible. I would be willing to cut Cohn a break if this wasn’t just one more indicator of a long pattern of sleaziness. Let’s take a look at the big picture, shall we?

1. Pulitzer Prize winner and former HQNT treasurer Jack Anderson has said that Doug Cohn is “untrustworthy”.

http://www.washingtonpost.com/wp-dyn/articles/A4038-2004Aug15_2.html

2. Judge Frost in the Ohio Hospital Association case didn’t buy Doug’s “The-lawyer-ate-my-homework” excuse.
3. You stated that the original Court ruling was that Cohn did not commit conversion. You conveniently overlook that the jury thought that Cohn was such a sleazeball that they wanted to reward the Raos even more money than they asked for.
4. Cohn has issued numerous false and misleading press releases. For example, on April 7, 2003, Cohn announced earnings for Fiscal Year 2002 of 10 cents per share. In fact, earnings were only half that. On June 19, 2000, HQNT announced the closing of a deal to acquire Information Resource Products Inc. There was no such acquisition. On May 3, 2004, Doug Cohn announced the acquisition of a 10,000 square foot building to be paid in part, by SGD Trade credits. There is no verifiable evidence that HQNT ever acquired such a building. There is, however, strong evidence that Doug forgot to mention in the press release that those trade credits were worthless because SGD had gone out of business.
5. Speaking of SGD trade credits, I showed strong evidence in post 3908 and several previous posts that Doug lied on the 10QSB he submitted to the SEC on November 20, 2003 when he valued the SGD trade credits at $2.6 million. Neither you, Financeguy, nor any of the other members of the “In-Doug-We-Trust” club have been able to refute my evidence.
6. Throughout April and May 2004 Doug was saying that 2003 Financials would be released “shortly” or “imminently”. Then he came up with the excuse that the financials were being delayed because of the Stewart and Shaw acquisition. He abandoned that excuse on October 18, 2004 when he said all the accounting issues surrounding the acquisition had been straightened out. Then he came out with the excuse that he couldn’t release the financials because somehow that will help the shorts. (How’s that short squeeze going, by the way?). Now, not even ProfitScout buys that excuse. He, and many other longs are saying that the stock will go to the moon and the shorts will be in a world of pain once the financials are out. And finally, we are now hearing the excuse that Cohn can’t get the financials out because of the excessive burden of Sarbanes-Oxley. Excuse me, but the financials were due on March 30, 2004—over a year and a quarter ago. I could understand SOX delaying it by a few weeks or even a few months, but give me a break. Tell me, Financeguy—if it was YOUR responsibility to produce an important report for your boss and if you were over a year late, do you think you would still have a job???
7. Even some stockholders who once spoke favorably of HQNT now think that Cohn is not on the up and up. Musky Don once praised HQNT’s software when some of the bashers doubted its existence. He even once offered to help the company out. Now he is highly critical of Doug and he has stated that he believed that Doug lied to him on the phone on April 1, 2004 when Doug told him that the financials would be released in April.
8. James Connors, an attorney who helped win the Rao, is now suing Doug for failing to pay his legal bills. He claims that Doug has been transferring assets out of HQNT. Now I don’t know if Connors is telling the truth or pulling this out of his a_ss, and neither does anyone else here. And if Connor’s allegations were the only allegations of wrongdoing against Doug, I would dismiss them out of hand. But I am not sure what to make of his allegations in light of all the above evidence that Doug hasn’t been on the up and up.
9. Doug Cohn used to be a nationally syndicated writer. He knows how to use the written word to defend himself. He could have responded press releases to the questions that Max Jones (Jigfish) was raising to clarify apparent business anomalies. Or he could have made his operations more transparent by publishing detailed explanations on his web site. Or he could have gone on Raging Bull to debate Jones and explain the anomalies that Jones was questioning. Or he could even have hired a PR person to represent the company on Raging Bull. There are a number of ways that Cohn could have answered Jones’ challenge—that is, assuming everything at the company was on the up and up. You would think that someone who was a nationally syndicated columnist would value the First Amendment over all others and would cherish Jones’ right to ask questions. You would think that someone with Cohn’s background would realize that the remedy to speech you don’t like is counter-speech to get your point across. But sadly, that was not the case. Instead of debating the issues like a gentleman on a level playing field, Cohn set his legal goon squad on Jones with a bogus SLAPP suit in order to shut him up.

And now, Financeguy, with all these warning signs that there is something seriously wrong with Cohn’s ethics, you want us to dismiss the Rao judgment that HQNT committed conversion as nothing more than the result of simple but honest misunderstanding that arose over a complex legal issue? Sorry, but that doesn’t wash with me. Maybe Doug will escape without punitive damages—in which case this affair will leave only a minor stain on Doug’s reputation compared to the Exxon Valdez-sized stain left by the major snafus listed above. Perhaps the damage will be more serious if punitive damages are levied. But in any case, this will end up as one more incident in an increasing list of events that calls Doug’s integrity into question.

Now, I will agree with you on a couple of points. This was a complex case. And Dr. Rao was not blameless in this nasty affair. But you said something that I can’t let slip by without comment. You wrote:

Cohn appropriately cancelled all agreements when the full extent of their misconduct became apparent.
Oh, really? When he cancelled the agreement and decided not to pay Rao et al, did he also return the software and did he pledge not to use it in his business? If so, where was the press release announcing that the business deal with the Raos had fallen through and that the company would not be using their software? Or did he keep the software in order to use it as a basis for building his business?

When I was a youngster I was taught that if you kept something without paying for it, it was called theft.

DID YOU CATCH THAT...OR DID I GO A LITTLE TOO FAST FOR YOU?

Clearly, there were better ways for Doug to have handled the incident. He should have immediately returned the software to the Raos and sued them for breach of contract the minute he found out that they had sold him a bill of goods. Or at the very least, if he kept the software then he should have paid them a reduced price to reflect the value that HQNT had received from them. Making at least a partial payment to the Raos for value received would have demonstrated good will on Cohn’s part. Do you know if he made such a payment, Financeguy? It is hard to believe that the jury would have awarded the Raos more money than they had asked for had Cohn made a good faith payment. But if you have solid evidence that he did make a good faith payment for the value received then please let me know and I will be happy to acknowledge my error.