8 ms·

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got real

by kabdib 8y ago

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Treat startup options as wastepaper. You might get lucky, but it's really, really unlikely.

deanmoriarty 8y ago
I would be really curious if someone could shed some light on how a healthy company could simply decide to "extinguish" exercised shares. Like how exactly would they go about doing that, and do you have examples I can read up describing where and how this happened? I would understand if that happened when the company is in trouble (e.g. valuation dropping below the last preferred valuation, so preferences kick in, or as a result of the company having to honor very high liquidation preferences), but otherwise? The only couple very shady cases I know about where Facebook with the Brazilian cofounder (with a complicated legal process where they reincorporated the company into a new one or something like that) and Skype with the employees (who naively signed a clawback clause in their agreement stating that the company could repurchase shares in the future at the original grant value even if their price skyrocketed, or something similar). In all the other cases I know about where employees got screwed, it was because the company saw its valuation plummet and the investors preferences kicked in, in one way or another, so "extinguishing" common shares in that case is "expected" and more similar to a public company declaring bankruptcy and seeing the shareholders being wiped out while the bond holders can generally recoup something, since they have "preferred" terms inherent in the nature of the bonds.
- mrnobody_67 8y ago
  See Zynga, cancelling options prior to IPO: https://news.ycombinator.com/item?id=3220819 https://news.ycombinator.com/item?id=3220819
  - deanmoriarty 8y ago
    Sure, that is incredibly shady, and doesn't deserve any sort of justification. But, for the sake of the discussion, I'm purely focusing on common shares that the employee already owns, which means vested options that were already exercised. Zynga's shady practice was affecting unvested options.
- martin_ 8y ago
  It happened to me recently, here's a couple of snippets document I received: The TLDR is "The majority of the board has already approved the decision of eliminating common stock and distributing excess payments to two founders and the product lead" Each holder of Preferred Shares is entitled to receive cash merger consideration in exchange for the cancellation of his, her or its shares pursuant to the terms of the Merger Agreement. Each holder of Common Shares will not be entitled to receive any merger consideration in exchange for the cancellation of his, her or its Common Shares. In case interested, here's the full redacted disclosure -- docusigns followed very shortly after: https://pastebin.com/q6q7XMvF https://pastebin.com/q6q7XMvF
  - deanmoriarty 8y ago
    Hold on a second (and thanks for this!). If I read your document right, it says: The Company expects that the proceeds available for distribution to the holders of Preferred Shares, including the full release of the Indemnity Escrow Fund, will be approximately $0.5816 for each Preferred Share (the “Estimated Per Share Consideration”). And in another portion, it says: before any distribution or payment of merger consideration is made to holders of Common Shares, the holders of Preferred Shares are entitled to receive $2.66 per Preferred Share (the “Liquidation Preference”). And The holders of Common Shares will not be entitled to receive any merger consideration in exchange for the cancellation of their Common Shares because the maximum potential merger consideration payable to the Stockholders pursuant to the Merger Agreement is less than the aggregate amount of the Liquidation Preference. Does this indicate that the company sold for an amount low enough that not even the investors recouped their original capital (selling shares at $0.5 instead of the $2.66 they were at least worth according to the liquidation preferences, so overall a significant "failure")? Because if that's the case, it seems completely normal to me that common shares were nullified and it's fundamentally different than saying that shares were extinguished for "no reason" (i.e. out of pure corporate greed), like I interpreted GP's comment. If not, this is instead a horror story.
    - martin_ 8y ago
      Yes that’s correct, I don’t think anything nefarious happened. The big bummer, though, is I had $0.01 shares and paid AMT at a much higher valuation and expect it to take a few decades to claim back the loss. Was my first time working with ISOs and didn’t know about 83b’s
- xrd 8y ago
  This is what startups pay a lawyer to do. It's not that hard: restructure the company ownership in a long document with complicated terms. Get the employee to sign it and voila, early employees are screwed. The only real response is just not signing, but they will tell you the company will die if you don't do it, and you probably will just take it rather than fighting. At least I did.
  - deanmoriarty 8y ago
    But signing something without not understanding it is too naive. So, assume I already left the company and exercised a big bag of common options and so I have a decent amount of common shares. If they tell me to sign something that looks shady I just say: "No, it looks shady". What then, can they do?
    - stingraycharles 8y ago
      Send to lawyer's office to pressure you. It doesn't take a lot of imagination to see that this can happen. People are generally naive, and there are just a few that will resist and fight.
      - johannes1234321 8y ago
        Especially if you depend on the money the job pays now and you can't pay a legal battle while searching a new job.
        xrd 8y ago
        This. Stated another way, you need to make a decision in the very small timeframe about the tiny chance of success in the far away future, versus guaranteed success (your next paycheck) in the very close future.
      - village-idiot 8y ago
        Very few people also have their own lawyers, although pretty much everyone involved in a startup should have one.
- sonnyblarney 8y ago
  'Extinguishing' aside, there are ways to essentially devalue shares, simply by offering up a lot more, at a low price to current investors, thereby washing away the relative value of old shareholders. Once investors do this, they can take control of a company, and even issue new equity to current employees to keep them happy. This is a tricky thing in normal scenarios because obviously the shareholders getting wiped out might sue, unless they are 'in on the deal' and coughing up more money. There are legal obligations around valuation as well, it can't be 'made up'. But if a company is effectively bankrupt, then the board can basically nullify old shares by making them worth 'near zero' and issuing new shares cheaply.
  - sonnyblarney 8y ago
    I should add that this happened to me as an employee of a fairly large telecom startup. The common term is 'washout round' [1] and this practice is not entirely uncommon. [1] https://www.investopedia.com/terms/w/washoutround.asp https://www.investopedia.com/terms/w/washoutround.asp
johnwyles 8y ago
I am not sure how you are the top comment when you are complaining about issues that generally are not relevant to the post, you didn't explain your "extinguished" shares, and you do not explain why it would not be worth it to go after them if they have done something to you... However, your last comment holds up well and I echo that sentiment.
breischl 8y ago
I had a former employer do something different but similar. They sold all the products to another company, paid all of the proceeds out as a bonus to the execs and big investors, and left the holders of the common stock (ie, employees who had bought their options) with a worthless, empty shell. Thanks for working hard and buying shares in the company!
- jammygit 8y ago
  What stops ordinary companies from doing this to ordinary shareholders?
  - kingbirdy 8y ago
    That no one would buy shares in the new company, making it worth dramatically less than the old one
  - jungturk 8y ago
    Fiduciary duties - I'm not sure if those are being left out of these anecdotes or there were actual issues preventing the obligations from being enforced. https://smallbusiness.chron.com/legal-relationship-between-shareholders-ceos-33637.html https://smallbusiness.chron.com/legal-relationship-between-s...
robbyking 8y ago
I had a similar experience. It was a while ago so I don't remember the exact details, but the long and the short of it is the three founders started a new company, moved all the company's assets over to it, then dissolved original company.
SkyMarshal 8y ago
>One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Sounds like an opportunity for a class action lawsuit. If they did it to you, they probably did it to others.
- commandlinefan 8y ago
  > they probably did it to others. They all do it to everybody. They're careful to make sure there's nothing/nobody to sue - the stock options are offered by an S-corporation, which then goes "out of business". You can sue the now out-of-business S-corporation if you'd like, but it has no value, being out of business.
autotune 8y ago
I got enough cash from stock options at the last small business to afford to job search for a few months without too much worry, so there is that.
sokoloff 8y ago
It seems fairly rare for large, established companies to issue ISOs (preferring to issue NQSOs or RSUs).
fatnoah 8y ago
>Treat startup options as wastepaper. You might get lucky, but it's really, really unlikely. I have a similar story. I've been a part of three startups (two exited, one still going) and the options in all were only worth an eventual capital loss. For my last company, I owned nearly a percent of shares, but they were still worth zero. The only money I got was a cash bonus and stock from the acquiring company as a retention mechanism (I was an executive of the company, rank and file got much smaller amounts). Startups are good for experience, being a big fish in a small pond, etc. but it's marginally better than a lottery ticket if you're looking for a big financial reward.
- deanmoriarty 8y ago
  You got $0 from your equity with ~1% of the company: is the reason the fact that the company turned against its employees, or more that the company exited for less than its last valuation and so there was no other way than make common shares worthless (like in the other conversation parallel to this one)? Thanks
  - m3kw9 8y ago
    Is basically fraud, but you need money to investigate it, collect evidence and sue which they fraudster know isn’t worth it for any employee.
mikekchar 8y ago
On the other hand, I once worked for a large well known company that actually gave me a pension. I can't remember what it was, but I think something like 5-10% of my total compensation went into this pension plan, which was essentially a mutual fund (although you could opt for long stock in the actual company instead). It took 3 years to fully vest. I stayed 5. When I left they sent me a letter literally saying that they thought the cost for me to hire a lawyer to get my money back would be more than the amount of money I could retrieve so they were going to keep the money. By that time I was already so annoyed with them that I concluded they were right: it wasn't worth my effort to extract a few tens of thousands of dollars from them (hey, this was a long time ago -- salaries were a lot smaller then ;-) ). Six months later the company dissolved under allegations of accounting fraud. The upper management actually got the bankruptcy court to allow them to use the entire pension fund as "retention bonuses" so that the company would have a chance of succeeding under their illustrious reign. That was an eye-opener. I had a few friends who had worked there for 20 odd years and were counting on that pension. Eventually I think they were able to sue the bankrupt company to get a portion of the money back. Of course, none of the fraud allegations went to court and the executives retained their retention bonuses (after having done nothing to save the company).
- hvidgaard 8y ago
  Hindsight is 20/20, but seriously. If you want to save money for pension, it must be something you control. Having your pension funds in the same company that pays your salary, is putting all the eggs in one basket. If they really want to pay you 10% in pension, they can pay to a fund in your name with some terms about when and how they can be used.
  - mikekchar 8y ago
    I totally agree. I was pretty young at the time. It was one of the experiences that taught me to ask for the salary that I want.
oarabbus_ 8y ago
>Treat startup options as wastepaper. I must ask - is there a hint of hyperbole here or are you dead serious? I currently work for a startup, and let's just say... I could've negotiated better on options when I joined. It's been on my mind to bring that up during my performance review. Is that a fool's errand then? What is your advice when working at startups?
- retiredcoder 8y ago
  Not GP but I would be prepared as one would in any company, bigCo or startup when discussing compensation. I.e.: Be prepared for a money conversation and have a Plan B ready to execute.
- ahartman00 8y ago
  It's commonly stated around here that VCs expect 9/10 of their companies to fail. So yeah, theres a good chance they are worthless. I think lottery tickets are a better metaphor, as they can be worth something. Wastepaper is hyperbole. I don't think its foolish to ask for more equity as compensation, though obviously I don't know anything about your performance or current compensation. :) In fact, I would recommend negotiating better. Sibling comment has good advice on preparation. I would add talk to an accountant about tax considerations, and talk to a lawyer about the legal aspects of it. The last time I talked to a lawyer, it was ~$120, and that was a somewhat complicated situation. If you don't want to spend that much money on something that could be worth thousands or millions, well... You might end up like a lot of the other posters in this thread, and that is sad. Seriously, a number of the posts in this thread likely wouldnt have happened, or could likely be resolved had the victim talked to a lawyer. Its like if you were robbed; you call the cops. Some people are saying its not worth it, it costs too much money, etc. If you arent going to call the cops, you can be robbed with impunity. It also means the thieves might grow bold, causing more headaches for the rest of us. A number of people have said that the company/management told them that talking to a lawyer would be a waste. This is the thief telling you not to call the cops. You wouldn't take legal advice from a thief, right?? At least one person stated that the company "made" them sign something. This is the thief saying you "have" to give them something. If you sign something saying they can take whats yours, then they can. So talk to a lawyer before agreeing. The more upset they get, the more pressure they apply; the more likely it is that you need to talk to a lawyer. Please, everyone, stand up for yourselves and get a lawyer. There are so many sad stories in this thread. The idea that people making 6 figures, with equity that could be worth that much or more can't spend ~$100 bucks to protect themselves!? It's appalling. Saying that it costs too much, not worth it, it wont matter anyway; that is like Stockholm Syndrome. Ok, that was hyperbole, but seriously, protect yourself. Edit: EVIDENCE! The cops can't do anything without evidence, neither can the courts. Well, your testimony is worth something, but its better to get it in writing. Consult your local laws, or a lawyer regarding things like audio recordings, recording phone calls, etc.

by kabdib 8y ago

deanmoriarty 8y ago

I would be really curious if someone could shed some light on how a healthy company could simply decide to "extinguish" exercised shares. Like how exactly would they go about doing that, and do you have examples I can read up describing where and how this happened? I would understand if that happened when the company is in trouble (e.g. valuation dropping below the last preferred valuation, so preferences kick in, or as a result of the company having to honor very high liquidation preferences), but otherwise? The only couple very shady cases I know about where Facebook with the Brazilian cofounder (with a complicated legal process where they reincorporated the company into a new one or something like that) and Skype with the employees (who naively signed a clawback clause in their agreement stating that the company could repurchase shares in the future at the original grant value even if their price skyrocketed, or something similar). In all the other cases I know about where employees got screwed, it was because the company saw its valuation plummet and the investors preferences kicked in, in one way or another, so "extinguishing" common shares in that case is "expected" and more similar to a public company declaring bankruptcy and seeing the shareholders being wiped out while the bond holders can generally recoup something, since they have "preferred" terms inherent in the nature of the bonds.

mrnobody_67 8y ago
See Zynga, cancelling options prior to IPO: https://news.ycombinator.com/item?id=3220819 https://news.ycombinator.com/item?id=3220819
- deanmoriarty 8y ago
  Sure, that is incredibly shady, and doesn't deserve any sort of justification. But, for the sake of the discussion, I'm purely focusing on common shares that the employee already owns, which means vested options that were already exercised. Zynga's shady practice was affecting unvested options.
martin_ 8y ago
It happened to me recently, here's a couple of snippets document I received: The TLDR is "The majority of the board has already approved the decision of eliminating common stock and distributing excess payments to two founders and the product lead" Each holder of Preferred Shares is entitled to receive cash merger consideration in exchange for the cancellation of his, her or its shares pursuant to the terms of the Merger Agreement. Each holder of Common Shares will not be entitled to receive any merger consideration in exchange for the cancellation of his, her or its Common Shares. In case interested, here's the full redacted disclosure -- docusigns followed very shortly after: https://pastebin.com/q6q7XMvF https://pastebin.com/q6q7XMvF
- deanmoriarty 8y ago
  Hold on a second (and thanks for this!). If I read your document right, it says: The Company expects that the proceeds available for distribution to the holders of Preferred Shares, including the full release of the Indemnity Escrow Fund, will be approximately $0.5816 for each Preferred Share (the “Estimated Per Share Consideration”). And in another portion, it says: before any distribution or payment of merger consideration is made to holders of Common Shares, the holders of Preferred Shares are entitled to receive $2.66 per Preferred Share (the “Liquidation Preference”). And The holders of Common Shares will not be entitled to receive any merger consideration in exchange for the cancellation of their Common Shares because the maximum potential merger consideration payable to the Stockholders pursuant to the Merger Agreement is less than the aggregate amount of the Liquidation Preference. Does this indicate that the company sold for an amount low enough that not even the investors recouped their original capital (selling shares at $0.5 instead of the $2.66 they were at least worth according to the liquidation preferences, so overall a significant "failure")? Because if that's the case, it seems completely normal to me that common shares were nullified and it's fundamentally different than saying that shares were extinguished for "no reason" (i.e. out of pure corporate greed), like I interpreted GP's comment. If not, this is instead a horror story.
  - martin_ 8y ago
    Yes that’s correct, I don’t think anything nefarious happened. The big bummer, though, is I had $0.01 shares and paid AMT at a much higher valuation and expect it to take a few decades to claim back the loss. Was my first time working with ISOs and didn’t know about 83b’s
xrd 8y ago
This is what startups pay a lawyer to do. It's not that hard: restructure the company ownership in a long document with complicated terms. Get the employee to sign it and voila, early employees are screwed. The only real response is just not signing, but they will tell you the company will die if you don't do it, and you probably will just take it rather than fighting. At least I did.
- deanmoriarty 8y ago
  But signing something without not understanding it is too naive. So, assume I already left the company and exercised a big bag of common options and so I have a decent amount of common shares. If they tell me to sign something that looks shady I just say: "No, it looks shady". What then, can they do?
  - stingraycharles 8y ago
    Send to lawyer's office to pressure you. It doesn't take a lot of imagination to see that this can happen. People are generally naive, and there are just a few that will resist and fight.
    - johannes1234321 8y ago
      Especially if you depend on the money the job pays now and you can't pay a legal battle while searching a new job.
      - xrd 8y ago
        This. Stated another way, you need to make a decision in the very small timeframe about the tiny chance of success in the far away future, versus guaranteed success (your next paycheck) in the very close future.
    - village-idiot 8y ago
      Very few people also have their own lawyers, although pretty much everyone involved in a startup should have one.
sonnyblarney 8y ago
'Extinguishing' aside, there are ways to essentially devalue shares, simply by offering up a lot more, at a low price to current investors, thereby washing away the relative value of old shareholders. Once investors do this, they can take control of a company, and even issue new equity to current employees to keep them happy. This is a tricky thing in normal scenarios because obviously the shareholders getting wiped out might sue, unless they are 'in on the deal' and coughing up more money. There are legal obligations around valuation as well, it can't be 'made up'. But if a company is effectively bankrupt, then the board can basically nullify old shares by making them worth 'near zero' and issuing new shares cheaply.
- sonnyblarney 8y ago
  I should add that this happened to me as an employee of a fairly large telecom startup. The common term is 'washout round' [1] and this practice is not entirely uncommon. [1] https://www.investopedia.com/terms/w/washoutround.asp https://www.investopedia.com/terms/w/washoutround.asp

johnwyles 8y ago

I am not sure how you are the top comment when you are complaining about issues that generally are not relevant to the post, you didn't explain your "extinguished" shares, and you do not explain why it would not be worth it to go after them if they have done something to you... However, your last comment holds up well and I echo that sentiment.

breischl 8y ago

I had a former employer do something different but similar. They sold all the products to another company, paid all of the proceeds out as a bonus to the execs and big investors, and left the holders of the common stock (ie, employees who had bought their options) with a worthless, empty shell. Thanks for working hard and buying shares in the company!

jammygit 8y ago
What stops ordinary companies from doing this to ordinary shareholders?
- kingbirdy 8y ago
  That no one would buy shares in the new company, making it worth dramatically less than the old one
- jungturk 8y ago
  Fiduciary duties - I'm not sure if those are being left out of these anecdotes or there were actual issues preventing the obligations from being enforced. https://smallbusiness.chron.com/legal-relationship-between-shareholders-ceos-33637.html https://smallbusiness.chron.com/legal-relationship-between-s...

robbyking 8y ago

I had a similar experience. It was a while ago so I don't remember the exact details, but the long and the short of it is the three founders started a new company, moved all the company's assets over to it, then dissolved original company.

SkyMarshal 8y ago

>One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Sounds like an opportunity for a class action lawsuit. If they did it to you, they probably did it to others.

commandlinefan 8y ago
> they probably did it to others. They all do it to everybody. They're careful to make sure there's nothing/nobody to sue - the stock options are offered by an S-corporation, which then goes "out of business". You can sue the now out-of-business S-corporation if you'd like, but it has no value, being out of business.

autotune 8y ago

I got enough cash from stock options at the last small business to afford to job search for a few months without too much worry, so there is that.

sokoloff 8y ago

It seems fairly rare for large, established companies to issue ISOs (preferring to issue NQSOs or RSUs).

fatnoah 8y ago

>Treat startup options as wastepaper. You might get lucky, but it's really, really unlikely. I have a similar story. I've been a part of three startups (two exited, one still going) and the options in all were only worth an eventual capital loss. For my last company, I owned nearly a percent of shares, but they were still worth zero. The only money I got was a cash bonus and stock from the acquiring company as a retention mechanism (I was an executive of the company, rank and file got much smaller amounts). Startups are good for experience, being a big fish in a small pond, etc. but it's marginally better than a lottery ticket if you're looking for a big financial reward.

deanmoriarty 8y ago
You got $0 from your equity with ~1% of the company: is the reason the fact that the company turned against its employees, or more that the company exited for less than its last valuation and so there was no other way than make common shares worthless (like in the other conversation parallel to this one)? Thanks
- m3kw9 8y ago
  Is basically fraud, but you need money to investigate it, collect evidence and sue which they fraudster know isn’t worth it for any employee.

mikekchar 8y ago

On the other hand, I once worked for a large well known company that actually gave me a pension. I can't remember what it was, but I think something like 5-10% of my total compensation went into this pension plan, which was essentially a mutual fund (although you could opt for long stock in the actual company instead). It took 3 years to fully vest. I stayed 5. When I left they sent me a letter literally saying that they thought the cost for me to hire a lawyer to get my money back would be more than the amount of money I could retrieve so they were going to keep the money. By that time I was already so annoyed with them that I concluded they were right: it wasn't worth my effort to extract a few tens of thousands of dollars from them (hey, this was a long time ago -- salaries were a lot smaller then ;-) ). Six months later the company dissolved under allegations of accounting fraud. The upper management actually got the bankruptcy court to allow them to use the entire pension fund as "retention bonuses" so that the company would have a chance of succeeding under their illustrious reign. That was an eye-opener. I had a few friends who had worked there for 20 odd years and were counting on that pension. Eventually I think they were able to sue the bankrupt company to get a portion of the money back. Of course, none of the fraud allegations went to court and the executives retained their retention bonuses (after having done nothing to save the company).

hvidgaard 8y ago
Hindsight is 20/20, but seriously. If you want to save money for pension, it must be something you control. Having your pension funds in the same company that pays your salary, is putting all the eggs in one basket. If they really want to pay you 10% in pension, they can pay to a fund in your name with some terms about when and how they can be used.
- mikekchar 8y ago
  I totally agree. I was pretty young at the time. It was one of the experiences that taught me to ask for the salary that I want.

oarabbus_ 8y ago

>Treat startup options as wastepaper. I must ask - is there a hint of hyperbole here or are you dead serious? I currently work for a startup, and let's just say... I could've negotiated better on options when I joined. It's been on my mind to bring that up during my performance review. Is that a fool's errand then? What is your advice when working at startups?

retiredcoder 8y ago
Not GP but I would be prepared as one would in any company, bigCo or startup when discussing compensation. I.e.: Be prepared for a money conversation and have a Plan B ready to execute.
ahartman00 8y ago
It's commonly stated around here that VCs expect 9/10 of their companies to fail. So yeah, theres a good chance they are worthless. I think lottery tickets are a better metaphor, as they can be worth something. Wastepaper is hyperbole. I don't think its foolish to ask for more equity as compensation, though obviously I don't know anything about your performance or current compensation. :) In fact, I would recommend negotiating better. Sibling comment has good advice on preparation. I would add talk to an accountant about tax considerations, and talk to a lawyer about the legal aspects of it. The last time I talked to a lawyer, it was ~$120, and that was a somewhat complicated situation. If you don't want to spend that much money on something that could be worth thousands or millions, well... You might end up like a lot of the other posters in this thread, and that is sad. Seriously, a number of the posts in this thread likely wouldnt have happened, or could likely be resolved had the victim talked to a lawyer. Its like if you were robbed; you call the cops. Some people are saying its not worth it, it costs too much money, etc. If you arent going to call the cops, you can be robbed with impunity. It also means the thieves might grow bold, causing more headaches for the rest of us. A number of people have said that the company/management told them that talking to a lawyer would be a waste. This is the thief telling you not to call the cops. You wouldn't take legal advice from a thief, right?? At least one person stated that the company "made" them sign something. This is the thief saying you "have" to give them something. If you sign something saying they can take whats yours, then they can. So talk to a lawyer before agreeing. The more upset they get, the more pressure they apply; the more likely it is that you need to talk to a lawyer. Please, everyone, stand up for yourselves and get a lawyer. There are so many sad stories in this thread. The idea that people making 6 figures, with equity that could be worth that much or more can't spend ~$100 bucks to protect themselves!? It's appalling. Saying that it costs too much, not worth it, it wont matter anyway; that is like Stockholm Syndrome. Ok, that was hyperbole, but seriously, protect yourself. Edit: EVIDENCE! The cops can't do anything without evidence, neither can the courts. Well, your testimony is worth something, but its better to get it in writing. Consult your local laws, or a lawyer regarding things like audio recordings, recording phone calls, etc.