Remember Charles “Junior” Johnson, CEO of the dot com wonder company PurchasePro? AOL sure does! Particularly the executives charged with sketchy behaviour—yes, that’s a legal term—for some shady mutual dealings! And, let’s not forget the hefty fine AOL paid.
AP: A flashy Las Vegas entrepreneur who became a billionaire at the height of the dot-com bubble was sentenced Friday to nine years in prison for stock fraud, capping a seven-year investigation that led to seven convictions.
The sentence meted out to Charles E. “Junior” Johnson, founder and CEO of now-defunct PurchasePro Inc., was significantly less than that sought by federal prosecutors, who had recommended he spend between 16 and 17 1/2 years behind bars for defrauding investors in his now defunct software company in 2001.
U.S. District Judge Liam O’Grady ruled that because Johnson’s crimes occurred more than seven years ago, he should be sentenced under older federal sentencing guidelines calling for a lesser sentence. Sentencing guidelines are not binding on judges, but frequently serve as a benchmark for their decisions.
Johnson was convicted last May of stock fraud, witness tampering and obstruction of justice.
Prosecutors said he was the ringleader of a scheme to falsely inflate PurchasePro’s revenue in the first three months of 2001, as the high-tech economy was in freefall. Seven people were convicted in a long-running investigation, which also exposed improper accounting practices at America Online, which had been PurchasePro’s business partner.
That’s some partnership it had with AOL!
Prosecutors said he orchestrated efforts in the first quarter of 2001 to inflate the company’s revenue to meet the expectations of Wall Street analysts. The scheme, authorities said, included falsified and backdated contracts, and secret side deals with AOL, which had a marketing partnership with PurchasePro.
PurchasePro relied heavily on its partnership with AOL to sell its core product, a “marketplace licence” and software that supposedly facilitated business-to-business commerce. But AOL could only sell the licenses by relying on the side deals in which PurchasePro agreed to buy equal amounts of goods and services from companies willing to buy from PurchasePro.
In all, seven PurchasePro employees, including Johnson, were convicted. Four others, including two midlevel executives at AOL, were acquitted of all charges.
While nobody at AOL was convicted of fraud, the company as a whole paid a $210 million fine in 2004 to settle criminal charges that it had aided and abetted stock fraud at PurchasePro.
Isn’t it always the rich guys who take the fall?
…At one point, when PurchasePro was a Wall Street darling, Johnson owned shares worth about $1.2 billion. Living in Las Vegas, he had a penchant for expensive suits and counted casino mogul Steve Wynn among his many friends.
But the entrepreneur lost it all as the stock tanked and the company went into bankruptcy.
defence attorney John Steer said the fact that Johnson was wiped out should merit leniency, given his failure to profit from the fraud.
Oh, well, in that case…!
Steer said Johnson is now essentially broke and will be unable to pay the $9.7 million in restitution that the judge could impose as a part of the sentence. Restitution is to be addressed at a later date.
Johnson also was convicted of obstruction of justice for trying, unsuccessfully, to sneak fabricated e-mails into evidence at his trial. His previous lawyers caught him and resigned from the case, resulting in a mistrial. Johnson was subsequently convicted at retrial.
On Friday, O’Grady said Johnson showed “astounding contempt for our rule of law” and told him, “You obstructed justice at every turn.”
Kind of impressive persistence, no? He should get some credit for that.
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