PurchasePro, two execs cleared
McLEAN, Va. — A jury on Thursday cleared two former executives at AOL and a defunct Las Vegas software company of civil fraud charges brought by federal regulators who accused the executives of concocting sham financial transactions back in 2001.
A third defendant was found liable on one count and cleared on three others.
Kent Wakeford, a former executive director at AOL’s business affairs unit, and Michael Kennedy, who was chief technology officer at Las Vegas-based PurchasePro, were found not liable on all counts.
Christopher Benyo, who was PurchasePro’s senior vice president for marketing, was found liable of aiding and abetting PurchasePro, but not liable of misleading accountants, preparing false books and circumventing accounting regulations. He faces fines and penalties that could exceed $100,000. Because these are civil charges, he is not at risk of any jail time.
The verdicts in U.S. District Court in Washington come more than a year after all three were acquitted at criminal trials stemming from some of the same transactions.
The executives were accused of scheming to falsely boost PurchasePro’s revenue in the first quarter of 2001, as the dot-com economy was in collapse.
At the time, PurchasePro was leaning heavily on AOL to help it sell its core product, a “marketplace license” designed to facilitate business-to-business purchases.
But AOL had a hard time even giving the licenses away for free, so prosecutors said the defendants engaged in a variety of deceptions to make it appear to investors that PurchasePro’s business was solid, including secret side deals to reimburse companies that bought the software.
Wakeford testified in his own defense at both the criminal and civil trials, including more than 15 hours of cross-examination.
“My family and I have spent seven years fighting to clear my name in this matter, and I’m relieved that two juries have now concluded that I was, in fact, key to exposing fraud at a company that was doing business with AOL,” Wakeford said in a statement.
Benyo’s lawyer, Terrance Reed, said he will ask the judge to toss out the remaining count.
“We respect the jury’s decision, but we’re disappointed they didn’t give us a complete, 100 percent victory,” Reed said.
Kennedy’s lawyer, David Schertler, said the verdict is “a wonderful vindication for Michael Kennedy in a case that never should have been brought against him by the SEC.”
Two individuals, former AOL executive John Tuli and PurchasePro founder Charles “Junior” Johnson, have still not gone on trial on the civil charges.
In the criminal case, Tuli was acquitted and Johnson, who went on trial separately last year in a bench trial, is still awaiting a verdict from the judge.
AOL is now a division of Time Warner, which in December 2004 paid a $210 million fine to settle criminal charges that AOL as a corporate entity aided and abetted stock fraud at PurchasePro.