This comment on another post [Post ID: @OP+1kh9rs9x2] is a very good factual summary. I like how the OG poster explained how/why/what/when that led to the Chapter 11 and going Private. Pretty stunned that, despite all the verifiable facts and SEC Filings that some people still believe (see comments) the Chapter 11 was a choice and that Alan Masarek had any other option available to him. Jim Chicago & Kieran McGrath were protected by the Chapter 11 Filing. If not, they would not have escaped criminal charges brought by the SEC (note -- different than civil suits they have escaped). Avaya would have liquidated without the chapter 11 due to the irregularities in the SEC filings.
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August 9, 2022 SEC 12b-25
NOTIFICATION OF LATE FILING
"Furthermore, and separately [from the delayed 10-Q SEC Earnings Report Filing] the Audit Committee has also commenced an internal investigation to review matters related to a whistleblower letter that remains ongoing"
https://www.sec.gov/Archives/edgar/data/1418100/000141810022000083/formnt10-q3q22.htm
Apollo and it's army of organizations that conspire to take over companies "stepped in" by creating an entrapment to force Alan Masarek's hand into allowing the Chapter 11 so they could steal equity and take Avaya private.
TIMELINE REMINDER
The Subscription game-- which was a risky short-term strategy to falsely inflate the Market Valuation of Avaya so the greedy BoD and C-Suite could sell Avaya for north of $5b -- caught up to them and they had nowhere to hide in March 2022. Now IF they could book an enormous deal they could have extended the charade for another few quarters. That deal was to be Wells Fargo, if memory serves. So they delayed earnings in hopes to find an accounting workaround to explain away the unexplainable math that was the earnings reality. NOTE -- They spent since late 2019 fudging the numbers based on an algorithm of subscription-economy math that assumed a set value for each base client multiplied by market potential for signing the base clients to a subscription plan. THESE WERE NOT REAL #'s!!! For many quarters they could escape scrutiny b/c maintenance contracts were still collecting money. But when the first round of the 3 yr subscription deals were up, they were left with evaporated maintenance deals and accelerated client departures. It was one large empty hole.
In May 2022, the situation hit severe crisis status. There was no explaining away the #s. They needed more than just one enormous deal. The Slippery Slope Subscription game was now a runaway train. The BoD knew they needed something extreme to buy time to avoid being exposed for the 3.5 yr con-game of pretending that the marketing soundbytes of the "subscription economy" translated into real revenue. They initiated the age-old strategy of the CEO-Shuffle and began an aggressive search to name a new CEO before they had to face yet another SEC filing delay. They begin talks with Masarek in May. Hire him in June. Announce him in July. Masarek is up for the challenge and confident he can stabilize Avaya by December .....HOWEVERApollo Global deploys a leveraged lending takeover plan. It was an unofficial hostile takeover. They are able to secure some of the leveraged lending related to Avaya loans, yet not enough to execute a hostile takeover. So they instead devise a plan to make things so uncomfortable for Avaya leadership that they will just give in. They deploy their go-to auditing firms and dirty PR spin-doctors to both a) find dirt on Avaya to use as leverage; and b) entrap Avaya via auditing. This included names like Alix Partners.
August 2022 -- Internal Audit discloses that Avaya lacked Internal Controls due to a broken process of formally investigating Ethics and Corporate Compliance reports. One example was a "Whistleblower" which filed a formal complaint months (maybe even a year) prior questioning accounting documentation of subscription deals and the risk to the overall business. At the time of the report, it was Shefali Shah's responsibility to ensure the complaint was properly and formally investigated. Instead, it was never even pursued. The independent auditing firm identified the breach of protocol that must be followed by any publicly traded company. Therefore, they were obligated by law to report the breach of protocol to the SEC in their next "we still can't file earnings" extension filing. This is called an "ICFR Weakness
November 28, 2022 SEC FORM 8-K Avaya Admits to Lack of Internal Controls based on result of investigation. This essentially states that they violated SEC Rules by not pursuing the whistleblower complaint, however stops short that the complaint itself qualified as a whistleblower concern. "The deficiencies in internal control over financial reporting (ICFR) represented “material weaknesses,” the cloud technology company said in a filing with the Securities and Exchange Commission (SEC)
Avaya discloses ICFR weaknesses linked to whistleblower logs Compliance Week
https://www.complianceweek.com/accounting-and-auditing/avaya-discloses-icfr-weaknesses-linked-to-whistleblower-logs/32407.article
- DECEMBER 2022 Apollo now believes they have Avaya cornered to give in to a Chapter 11 so they could go private and Apollo can deploy their tried and true law firms to manage the filing in their favor. Yet Alan Masarek was not giving in. So Apollo spent December 2022 maneuvering to force AMs hands. The end result of paying AM $10m ($6 m retention bonus so he would stay despite looming bankruptcy & $4m of his original sign-on bonus that he was required to use to buy Avaya shares. They waived that requirement and he was allowed to keep the money as cash. They also awarded Shefali Shah $1.2m as they needed her to help them go after Jim Chirico if that was necessary.
Avaya CEO To Get $6 Million Cash Award As Potential Bankruptcy Looms https://www.channelfutures.com/regulation-compliance/avaya-ceo-to-get-6-million-cash-award-stock-falls-below-nyse-minimum
SO @ab IS SPOT IN. THE WHISTLEBLOWER WAS REAL. IT WAS THE Everything. without that Whistleblower report Internal Controls Snafu, Apollo wouldn't have had the chance to deploy their gremlins to force AM into a takeover (also known as conspired Chapter 11).