IDG News Service —
The former chairman and CEO of PurchasePro.com, a business-to-business software broker that died during the dot-com bust, has been found guilty of securities fraud, witness tampering and other crimes, the U.S. Department of Justice announced.
Charles "Junior" Johnson, who resigned as chairman and CEO in May 2001, was found guilty in U.S. District Court for the Eastern District of Virginia of conspiring to commit securities fraud, securities fraud, witness tampering and obstructing an official proceeding. Judge Walter Kelley released his verdict Thursday after a bench trial that finished in December.
Johnson founded PurchasePro.com in 1996, and the company was one of the dot-com boom's early success stories. PurchasePro, which had a close relationship with AOL, sold computer software through a B-to-B marketing license, allowing businesses to buy and sell products on the Internet, to participate directly in PurchasePro's own Web-based marketplace and to create their own branded marketplace using PurchasePro's software.
The company went public in September 1999, and shares leapt 117 percent the first day to close at US$26.13. In December 1999, the company's adjusted stock price hit a peak of nearly $396 a share.
In March 2000 and April 2001, the company signed deals with AOL, the latter to jointly develop a B-to-B marketplace called Netscape Netbusiness Marketplace. But in late April 2001, the company announced its earnings would be significantly lower than Wall Street expectations, and that same month, investors filed a class-action lawsuit against the company, accusing its executives of improperly recognizing revenue as a way to pump up stock prices.
In August 2002, the U.S. Securities and Exchange Commission began investigating AOL's relationship with PurchasePro, and in September 2002, PurchasePro filed for bankruptcy.
Johnson, 47, of Las Vegas, was indicted in January 2005. He faces a maximum penalty of 20 years in prison for the charges he was found guilty of Thursday.
Johnson and his co-conspirators, including other senior officers at PurchasePro, conspired to falsely inflate the revenue the company announced to investors from the sale of PurchasePro marketplace licenses as well as the revenue generated for AOL, the DOJ said. Johnson worked with company employees Robert Geoffrey Layne and James Sholeff to inflate revenue for the first quarter of 2001, the DOJ said.
The three men misled PurchasePro's auditors by forging documents, altering fax headers and backdating contracts, and then placing the documents in PurchasePro's files where the auditors would find and rely on them, the DOJ said. Layne and Sholeff each pleaded guilty and were sentenced to prison terms.
