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In these days of close corporate scrutiny, companies frequently investigate their own employees’ conduct. But one highly litigious Silicon Valley company has taken the internal probe in a new direction: The board of embattled Rambus Inc. hired a pricey outside law firm to investigate its CEO’s wife. Nancy Hughes — the apparently quite protective spouse of CEO Harold Hughes — spent much of the past year posting messages under an alias on an online message board for Rambus investors. Though she hid her identity with the nom de plume “clarissamehitable,” Nancy Hughes staunchly defended her embattled husband — sharply accusing his online critics of slander — raising suspicions among others on the www.investorvillage.com board that she was a company insider. “She was viewed as definitely a strong booster of Rambus and everything Rambus,” says Doug Kelley, an investor and former poster on the message board, who, in tandem with his brother, James, is suing the company over backdated stock options it gave to executives. “She frequently defended Harold,” Kelley says. In an interview in early June, James Kelley said he was suspicious that clarissamehitable was either Harold Hughes or someone close to him. Rambus spokeswoman Linda Ashmore says that around that time, a member of the company’s management — she wouldn’t say who — saw the postings and notified company directors. They brought in James Lyons, a partner at Skadden, Arps, Slate, Meagher & Flom, to find out whether Harold Hughes had done anything wrong. “I was in charge of the investigation,” Lyons confirmed last week, adding that it finished in July. NOTHING TO SEE HERE In an e-mail from Ashmore, Rambus says the probe uncovered no wrongdoing. “The board has determined that Harold had no involvement or knowledge of posting to any message board,” the e-mail says, adding, that “no trades took place in connection with these postings” and “the appropriate thing to do was to ask that she not post anymore, which she already had done.” Jessica Grant, a lawyer at Taylor & Co. who represents Harold and Nancy Hughes, says the wife — an MBA and a former Chevron executive — thought she was acting appropriately. “Nancy Hughes acted out of loyalty to her husband, and she was trying to support and defend the management of Rambus,” Grant says. “She is a sophisticated businessperson who sought to base her opinion on publicly available information. She did not profit or help anyone profit.” TOUGH CROWD It doesn’t take much time on the Rambus message board to detect the rancor pervading the online investor community. Doug and James Kelley both say Rambus has a relatively unique community of activist investors, a group of tech-savvy businesspeople, some of them millionaires, who were wooed by the fact that Rambus possesses several patents for widely used semiconductor technologies. The only catch was that to get its windfall, Rambus — which licenses its technology but does not manufacture chips — needed to win a series of high-profile suits against companies it claimed were infringing on its patents. Those companies fought back by saying Rambus had illegally obtained its patents. The hearings in those cases were famously well-attended by Rambus investors from around the country. Last year, the company scored what seemed to be a huge victory, a $307 million jury award against Hynix Semiconductor for infringing its patents. But the award was cut to $134 million, and a few months later, the Federal Trade Commission said Rambus acted improperly when it didn’t disclose its patents to competitors during meetings to set industry standards. Steering the litigation was former general counsel John Danforth, a frequent butt of Nancy Hughes’ postings. Doug Kelley says that last summer, after Rambus disclosed that it had backdated historical stock option grants, a rift arose among active Rambus investors who supported Danforth’s aggressive litigation tack and others who got behind Hughes. In several postings on the board last year, Nancy Hughes (as clarissamehitable) criticized Danforth, implied that he — rather than her husband — was to blame for some of the company’s litigation woes, and credited her husband with taking some responsibility away from the lawyer. Danforth’s role was changed from general counsel to litigation adviser in July 2006. Danforth, Nancy Hughes wrote, “is an intense and good litigator, but probably an obstructionist from a business standpoint. One of the organizational changes Hughes made when he came in was to move licensing from the responsibilities of legal.” In a separate post, she said Danforth “has been instrumental bringing Rambus to the point of realizing some litigation success. However, I’m less of a fan than many here. In my opinion, Danforth has artificially raised expectations (as in pumped) of the possible monetary rewards we might expect from successful litigation.” Danforth declined to comment, and Darryl Rains — a lawyer with Morrison & Foerster who represents him in litigation — didn’t return a call by press time. In a similar situation, The Wall Street Journal reported on July 18 that Whole Foods CEO John Mackey had been posting under an alias on a similar message board. While the Securities and Exchange Commission is looking into whether Mackey misbehaved, Rambus probably has nothing to worry about. In an early June interview about Hughes, Jesse Fried, a professor at University of California, Berkeley’s Boalt Hall School of Law who specializes in business ethics, said that even if it were the CEO himself, posting anonymously and without clear insider information was unlikely to affect stock price. Last week, Fried said he could not elaborate on the issue because he was consulted on the Hughes probe. And Rambus board member Abraham Sofaer, who has taken an active role in probing the company’s options problems, declined to comment. ADDING UP SMALL CLUES Through a year or so of posting — which ended in May — Nancy Hughes gave few clues to her identity. The one that stands out, though, was in response to another board member’s comment about the University of Michigan. “My grandfather, mother, and I all graduated from UM, and my daughter is our 4th generation Wolverine to enter Michigan this year,” she wrote. Indeed, the Hugheses’ daughter just completed her freshman year in Ann Arbor, the same school where Nancy Hughes received bachelor’s and master’s degrees, and where her mother got a nursing degree. And then there was her double-entendre response to another poster who criticized Hughes on the stock options issue. “Most if not all of us shareholders currently dislike him intensely. If you don’t like the heat .�.�.” the poster had written. Nancy Hughes’ response: “I don’t think Hughes has exercised any Rambus options. And I haven’t seen him leave the kitchen.”
Justin Scheck is a reporter with The Recorder, an ALM publication.

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