USDA’s Lending Program sure needs an overhaul
Yesterday I wrote about the Gigantic Guaranteed Loan that the USDA had given out to a company named Open Range Communications to string Wimax across Rural America, including my current home state of PA. Turns out that the head of the company, whose name is William S. Beans Jr, was formerly President and COO of ICG Communications. Funny thing happened while he was President of ICG– they filed chapter 11 bankruptcy, and were later brought up on multiple charges of Securities Fraud, with Beans being named party to the suits personally. I guess those Lawsuits are ongoing, since I couldn’t find any hint of a ruling. And I guess that means he’s still Innocent. For now.
Our taxpayer dollars at work. Now the USDA is handing him $267 Million. Boggles the mind, doesn’t it? One has to wonder what he did or said or didn’t say or do to get that kind of largesse from a Government Agency that’s been known to pass out the Pork to Politician’s Pals.
And if you read the complaint, it says that ICG promised new BroadBand Technologies and Broadband buildout– the same stuff Open Range is promising to Rural America.
From the complaint:
Throughout the Class Period, ICG Communications, Inc. (“ICG” or
the “Company”) represented itself to be one of the largest and fastest growing
competitive local exchange carriers (“CLECs”) in the United States, providing
telecommunications services to Internet Service Providers (“ISPs”) and small and
mid-sized businesses. As a CLEC, Wall Street measured ICG’s success by “line
count” (the number of revenue-producing lines the Company had installed) and the
revenues reported by ICG from those lines. During the Class Period, ICG reported
tremendous growth, both in the number of lines installed in its network and in
revenues earned. The Company’s 1999 Form 10-K, which the Company filed with
the Securities and Exchange Commission (“SEC”) on March 30, 2000, reported
that revenues had tripled to $479.2 million in 1999 from $149.9 million in 1997 and
that it had installed a “record” 133,000 net business lines and ISP ports during the
fourth quarter of 1999 . . . . The dramatic rise and precipitous fall of ICG was squarely the
result of the fraudulent conduct of two of ICG’s top corporate executives,
Defendant J. Shelby Bryan (“Bryan”) and Defendant William S. Beans (“Beans”).
Recognizing the opportunity and promise offered by the fast-rising Internet
industry, Defendant Bryan oversaw ICG’s fundamental shift away from ICG’s roots
as a traditional local phone service provider and into the business of providing
network services to Internet Service Providers (“ISPs”) and other third parties
seeking to transmit not only telephone-based voice data, but also video and the
other complex data comprising Internet-based communications.
Apparently the accounting was screwy and the stock WAY overvalued. Typical Pump and Dump, with the company going belly up, probably right after the principles cashed out.
Hmm, I gotta wonder who else works for this outfit . . .
Thanks go to Dave Burstein for the hint that led me to the above links.
04/8/08, 1:55 PM |
Actually, I have the final resolution. It was settled for $18M. There is also a judge’s interim ruling that is very strong. Ask and I’ll send them over. I’m reviewing with the USDA what the story is on this.
On the other hand, I don’t think ICG was a “pump and dump.” I knew them at the time, and they had a business model no more unreal than many others that did well in 1999-2000. It fell apart in 2000-2001, but so did Covad, Rhythms, NorthPoint and many others.
Glad someone is following this
Securities fraud class action filed on behalf of all persons and entities who purchased ICG Communications, Inc. stock on the open market during the period December 9, 1999 to September 18, 2000.
The court appointed BLB&G clients the Retirement Systems of Alabama and the Policemen’s Annuity and Benefit Fund, City of Chicago as Co-Lead Plaintiffs and BLB&G was appointed Co-Lead Counsel for the Class.
Background
Plaintiffs allege that throughout the Class Period, ICG fraudulently inflated its publicly-reported communications network “lines” and line-related revenues in order to create the appearance that it was one of the largest and fastest growing telecommunications companies in the United States. In addition, Plaintiffs alleged that ICG intentionally concealed enormous customer complaints, cancellations and service problems. After ICG publicly acknowledged its “major” customer service problems and associated revenue and growth problems, its stock rapidly collapsed, and ICG filed for bankruptcy on November 14, 2000. With ICG having filed for bankruptcy, the defendants are former ICG CEO, J. Shelby Bryan (“Bryan”), and former ICG President and COO, William S. Beans (“Beans”) (together, the “Defendants”).
In August 2004, the court denied in part and granted in part the Defendants’ motion to dismiss. On July 18, 2005, the court granted Lead Plaintiffs permission to file a Second Amended Complaint. The Second Amended Complaint identified numerous high level former ICG employees who specifically linked Defendants Bryan and Beans to ICG’s fraudulent line count inflation and concealment of ICG’s network problems. On February 7, 2006, Defendants’ motion to dismiss that complaint was denied as to all claims against Beans and as to all claims against Bryan except the Section 10(b) claim for line count inflation. The Court’s February 7, 2006 Opinion can be viewed by clicking here.
Defendants Agree to Settle All Claims for $18 Million
After over five years of litigation, Co-Lead Plaintiffs announced that they have reached a settlement of all claims against the Defendants for $18 million in cash. On July 28, 2006, the Court granted preliminary approval of Plaintiffs’ settlement with defendants Bryan and Beans.
A settlement fairness was held on January 12, 2007 at 10:00 a.m. before the Honorable Robert E. Blackburn, United States District Judge, at the Alfred A. Arraj United States Courthouse, 901 19th Street, Denver, Colorado 80294-3589 in courtroom A-701. The Court approved the settlement by Order dated January 19, 2007. Lead Plaintiffs’ motion for distribution of the settlement fund is pending before the Court.
IN ORDER TO BE ELIGIBLE TO SHARE IN THE BENEFITS OF THE SETTLEMENT, CLASS MEMBERS MUST HAVE SUBMITTED A COMPLETED AND SIGNED PROOF OF CLAIM FORM POSTMARKED NO LATER THAN DECEMBER 12, 2006.
04/8/08, 2:05 PM |
Thanks for the update, Dave. But even if this guy isn’t an intentional crook, he still presided over a company that went into bankruptcy, which still leads me to wonder why the USDA would hand him another huge sum of money . . . my money and your money. This does not exactly inspire confidence in the USDA decision making process.