Jurors this afternoon began deliberating about whether former executives at America Online Inc. and PurchasePro.com should be held liable for a $3.7 million transaction that the Securities and Exchange Commission says is proof that the defendants committed fraud and cooked the books to boost revenue.
Closing arguments ended shortly before 4 p.m. in the case against ex-AOL attorney Kent Wakeford and former PurchasePro officials Michael Kennedy and Christopher Benyo.
About the only thing defense lawyers and the SEC attorneys agree on after a six-week trial in the civil case is that a fraud did take place between March and April of 2001, when documents for a contract worth $3.7 million were backdated to help the financial projections at PurchasePro. They are only at odds over who perpetrated the scheme.
The defendants’ lawyers tried to cast doubt on the SEC’s arguments that their clients aided and abetted a securities violation by pointing to other PurchasePro executives who already are serving time for the fraud. Several of them testified during the trial after they became government witnesses.
“Each of these men did not know enough ... to know that it was wrong or fraudulent,” said David Schertler of Schertler & Onorato, who is representing Michael Kennedy. Kennedy was PurchasePro’s former chief technology officer. “Kennedy, Benyo, or Wakeford didn’t have the expertise that the SEC now says proves fraud.”
Dewey & LeBoeuf partner Henry Asbill, who represents Wakeford, told jurors that his client helped expose the fraud by raising questions about the $3.7 million transaction after he learned about it.
“Neither Kent nor AOL had any intent to commit fraud in the AuctioNet transaction,” Asbill told jurors in reference to the advertising deal between PurchasePro and AOL that government attorneys say was structured to artificially boost revenue as the dot-com bubble burst in 2001.
Asbill described Wakeford as a “mid-level manager” at AOL who had no interest in deceiving anyone because he owned no stock in PurchasePro and did not receive any compensation or bonuses for his work with the Las Vegas software company.
Asbill said Wakeford — one of two former AOL executives to be charged in the case — was involved in more than 104 contracts at the time the government alleges he was the mastermind behind a false contract drawn up to cover the $3.7 million transaction. The other ex-AOL manager — John Tuli — will be tried separately.
In closing remarks during rebuttal, SEC trial attorney David Gottesman said the defense attorneys’ tactics were predictable. The defendants were not mere innocent players who claim they were confused and duped about the sham contract document — officially called a statement of work.
“That’s what guilty people do. The more they get caught guilty in the act, the more they point the fingers at other people,” Gottesman told jurors. “The defendants in this case have misled and fooled a lot of people. Ladies and gentlemen, don’t let them fool you, too.”
If found liable by the seven women and four men serving as jurors in the civil trial before Senior Judge Gladys Kessler of the U.S. District Court for the District of Columbia, the defendants could be assessed fines by Kessler and be permanently barred from holding positions in publicly traded companies.
12 counts; 11 not liable; 1 liable against benyo-claim 3.
Posted by: just curious | April 24, 2008 at 06:29 PM