Why doesn't this error trigger client schedule failed?

11/08/2012 22:55:41 ACO5424E Could not connect to SQL server; SQL server returned:
11/08/2012 22:55:41 Failed to connect to server SERVER12345\SQL12345.
11/08/2012 22:55:41 Login failed for user 'sa'. (HRESULT:0x80131501)

and why isn't the connection failure sent to the TSM server?

command file based on sample file, with SQL authentication

Various versions of TDP.