PurchasePro stakeholders keep eyes on Time Warner settlement
Thursday, Dec. 16, 2004 | 11:11 a.m.
Shareholders and creditors of the defunct Las Vegas technology company PurchasePro.com Inc. could benefit from a flurry of legal activity on Wednesday that included guilty pleas from four former executives of the local company and the announcement of a $510 million in settlements with media giant Time Warner Inc.
Federal authorities for three years have been investigating transactions between PurchasePro and America Online, now a division of Time Warner. On Wednesday, attorneys for the Justice Department announced that it had reached a deal with Time Warner that would secure the company's cooperation into investigations into individuals involved in the deals and the payment of $210 million in restitution and fines.
Of that $210 million Time Warner paid to settle Justice Department charges, $150 million was ordered to be deposited into a compensation and settlement fund.
Reached Wednesday evening, Greg Garman, an attorney handling the bankruptcy proceedings of the PurchasePro estate, said he had made calls to the Justice Department in an attempt to determine whether those funds could benefit local creditors and shareholders harmed by the local company's collapse.
"That call has already been made," Garman said when asked about the estate's claim to compensation funds. "We are exploring all areas of recovery for our innocent shareholders and creditors."
Beyond the compensation fund, Garman said it was still unclear what, if any, affect the settlements would have on the bankruptcy proceedings.
Also announced Wednesday, were guilty pleas entered by four former PurchasePro executives. Robert Geoffrey Layne, a co-founder of PurchasePro and former executive vice president, pleaded guilty to one count of securities fraud.
Shawn P. McGhee, former chief operating officer at PurchasePro, pleaded guilty to conspiracy to commit securities fraud.
Dale L. Boeth, former PurchasePro senior vice president of strategic development, also pleaded guilty to conspiracy to commit securities fraud.
James Sholeff, former PurchasePro vice president and sales manager, pleaded guilty to perjury.
Time Warner also announced that it has reached a proposed settlement with the Securities and Exchange Commission that would require the payment of a $300 million penalty. Neither the Justice Department or SEC settlements would require that the company admit wrongdoing.
The Justice Department settlement includes a two-year deferred prosecution agreement. That deal requires that Time Warner cooperate into continuing investigations and meet a series of other provisions, felony charges will be dropped in two years.
"This deferred prosecution agreement did not come cheap for AOL," said James Comey, deputy U.S. Attorney General. "We have balanced our concern for the innocent parties against the important need to send a strong deterrent message and to protect the rights of victims."
Comey also outlined the government's take on the transactions that took place between AOL and PurchasePro. He said that PurchasePro agreed to give AOL stock warrants in return for placement in the media company's Internet business Web site and provide advertising and other services to the Las Vegas firm.
"As so often happened during the dot-com bubble days, the revenues that AOL and PurchasePro were counting on did not materialize," Comey said. "And instead of confronting that harsh reality, AOL and PurchasePro cooked up a scheme to inflate PurchasePro's revenues."
He said AOL paid millions of dollars to PurchasePro for products AOL had no use for. Comey also said AOL made secret deals with other companies to buy products from PurchasePro that were hidden from PurchasePro's auditors. AOL also misled PurchasePro's auditors by making false statements about its transactions with the company.
"AOL had a very strong motive to create the appearance of high revenues for PurchasePro, because the value of the warrants AOL had received in the deal depended on PurchasePro's performance," Comey said.
He said the scheme allowed PurchasePro to report $10 million in "bogus revenue" for the fourth quarter of 2000 and "at least $20 million in false revenue" for the first quarter of 2001.
AOL also reported an additional $20 million on fourth quarter 2000 revenue and another $15 million in revenue for the first quarter of 2001 because of the PurchasePro dealing, Comey said.
Comey refused to discuss specific individuals -- either with PurchasePro of AOL -- that are still the focus of ongoing investigations, but he did emphasize that investigations continue.
In September, two other former PurchasePro executives entered guilty pleas in connection with a fraud investigation into the company.
Jeffrey R. Anderson, former senior vice president for sales and strategic development for PurchasePro, pleaded guilty to conspiracy to commit wire fraud. Scott H. Miller, the former PurchasePro controller and senior vice president of finance, pleaded guilty to impeding and obstructing a federal criminal investigation.
At its pinnacle, PurchasePro, an e-commerce software company founded in 1996 by Charles "Junior" Johnson, employed more than 1,000 people, and its stock traded as as high as $188 a share in December 1999.
By May 2001, Johnson had been ousted by the company's board of directors amid mounting accounting problems. PurchasePro declared bankruptcy in September 2002, and when the sale of the company's assets to California-based Perfect Commerce was approved by a judge in January 2003, the number of employees had dwindled to about 70. The assets of the company -- which carried a stock value of $3.2 billion in 2000 -- sold for about $2.5 million.
archive
- Most Read
- Discussed
- Most E-mailed
- Trainers scuffle at Manny Pacquiao, Miguel Cotto weigh-in
- Live Blog: Pacquiao wins by TKO in round twelve
- Clubs want to be ‘good citizen,’ so stripper-mobile ends its run
- Police seek man who stole $2,000 worth of clothing
- Las Vegas club agrees to halt promotion featuring live dancers on truck
- Nuclear plant in Ely could complicate radioactive waste, water issues
- Now we can all see Islamic extremism for what it truly is
- Las Vegas Hilton reports wider loss in quarter
- Manny Pacquiao says he feels stronger than ever
- Floyd Mayweather Jr. and Manny Pacquiao: The only fight fans want to see
Blogs
The Kats Report
New face of Monte Carlo includes all the faces of Caliendo
The Greene Room
Predicting this weekend's Mountain West football slate (1 Comment)
Top Chef: Las Vegas
Top Chef Episode 11: Child's play
Miech Again
UNLV prez Smatresk is ready for some basketball (10 Comments)
Politics: The Early Line
Harry Reid's fourth TV ad begins running today
The Greene Room
Chad Ochocinco vs. Anderson Silva? That would be a sight ... (5 Comments)
Top Chef: Las Vegas
The Jet Stream: The three stages of chefdom
Calendar »
- 15 Sun
- 16 Mon
- 17 Tue
- 18 Wed
- 19 Thu
-
Actor's Expo at Rave Motion Pictures
Rave Motion Pictures Town Square 18 | 3 p.m. to 5 p.m.
-
Lily Tomlin at the Hollywood Theatre
Hollywood Theatre at MGM Grand
-
Neil Sedaka at the Orleans
Orleans Hotel-Casino
-
Supernatural Santana – A Trip Through the Hits at The Joint
The Joint
The Sun
Locally owned and independent for more than 50 years.
Technorati





