PurchasePro creditors seek $6.1 mil. from ex-CEO

Kevin Rademacher

Monday, March 29, 2004 | 11:24 a.m.

Amid increasing legal action over the failed Las Vegas e-commerce company PurchasePro.com Inc., a bankruptcy court lawsuit has been filed against the company's founder and former chief executive Charles "Junior" Johnson.

In the complaint, the company's estate is seeking the return of $6.1 million Johnson received from PurchasePro in 2001.

Of that total, $2 million was a "retention bonus" PurchasePro paid to Johnson in April 2001, just a month before he was forced out as chief executive and chairman of the board amid mounting legal trouble for the company.

The balance of the disputed total is $4.1 million paid to Johnson in December 2001 as a cash transfer and a subsequent stock transfer to cover business expenses and unexercised stock options.

The lawsuit claims the payments are voidable, in part, because they were made while the company was insolvent.

"(Johnson) received some preferential payments on his way out the door," said Greg Garman, an attorney representing the PurchasePro estate. "It is pretty clear that the company had minimal assets at that time and they gave a substantial portion of what they had left to Mr. Johnson. As a result of that they were not able to pay other creditors."

Johnson could not immediately be reached for comment.

In other legal action swirling around PurchasePro, depositions were scheduled to begin this month in a lawsuit alleging collusion on the part of Birch Street Systems. That case is related to the January 2003 $4.3 million sale of the failed Las Vegas company's operating assets to California-based Perfect Commerce.

Garman said Birch Street struck an illegal agreement with Perfect Commerce to withhold a competitive bid in exchange for other consideration. No dollar value has been placed on the action.

Garman said three other actions could result in "significant recovery" for creditors. Those include a summer trial in a case against Office Depot. That case claims that Office Depot executives on the PurchasePro board of directors made questionable trades of restricted stock, Garman said, adding that several millions of dollars could be at stake in the action.

He also said significant recovery could be seen in federal and state court actions against former PurchasePro officers and directors. That lawsuit, which also named Johnson, was filed last year.

The estate also filed this month a breach of contract lawsuit against the computer maker Gateway Companies Inc.

Garman said the computer builder received $35 million in consideration from PurchasePro but failed to hold up its end of a deal to provide marketing training support for PurchasePro's online procurement system. Contract documents contained in court filings show that Gateway was expected to provide services worth $40 million to PurchasePro.