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The Rise And Falling Out Of Value America

By Carrie Johnson
Thursday, October 18, 2001; Page E01

When J. David Kuo took over a closet-sized office at Value America back in 1999, he wasn't just buying into the dream of electronic retail. He also looked forward to strengthening his personal faith, which had wavered after a divorce and long hours working with the government and nonprofits.

Company leaders, from founder Craig Winn to chief executive Tom Morgan, explained in Kuo's job interview that they were committed to building the online marketplace on a foundation of unwavering integrity. Winn declared that 1 percent of the company's revenue would go to charity. Eventually, a small group of executives began meeting for voluntary prayer sessions one day each week at 7 a.m.

_____Washtech Archive_____
Value America To Sell Off E-Services Business(Oct. 23, 2000)
Value America: The Online Castle in the Air(Aug. 21, 2001)
Value America Files for Bankruptcy; Fires 185(Aug. 11, 2001)
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"People sought to use God to become better people," Kuo said recently over a cup of hot cider. "That had a profound influence on me. It was a question of taking a look again at faith."

Kuo signed on as spokesman for the company at a time when many in the dot-com industry believed they were truly changing the world. But he gradually saw his loyalty tested as Value America managers bickered among themselves amid a rapidly changing market and persistent problems in delivering such items as grills and toothbrushes to customers.

"I saw great things there, people professing devotion," Kuo recalled, "and then I saw people turn on each other. I saw godly people do very ungodly things. It was this unbelievably tangled web of personalities and emotions and everything else."

Kuo chronicles the rise and fall of Value America, one of the first Internet goliaths, in his new book, "Dot.Bomb." Even as it describes a fall from grace that mirrored the demise of other tech businesses, the Value America tale offers some insights into the role people's faith -- both religious and otherwise -- played in fueling the boom.

Religion always had a place at Value America. The Rev. Jerry Falwell made regular visits to headquarters to ink deals with Value America and another Winn business to create a retail Web site for his flock. Former Reagan-era education secretary Bill Bennett, a mentor to Kuo and a vocal supporter of school prayer, became a member of the company's board of directors. Prominent consultant and former Christian Coalition leader Ralph Reed journeyed to Virginia to advise Winn on his political and business ambitions.

Those who invested in the company's mission to revamp online sales now see its religious convictions as an asset that nevertheless could cloud their judgment of each other.

"For me the faith aspect of it was a real strength," said Morgan, who eventually fought Winn for the reins of the firm. "During some very difficult times you had something to lean on and other people to lean on."

Even so, Morgan said, he would have left the company months sooner and saved himself all kinds of exhaustion had he not felt personally committed to members of the staff with whom he shared a common spiritual and business outlook.

After all, it's difficult to jump ship when the company's charismatic founder, always selling one idea or another, confides in a prayer session that the failure of an earlier company left him feeling emotionally isolated, according to Kuo's book.

"He knew what it was like to sit across the table from bankers who once courted him and have them curse him," Kuo wrote. "There was, Craig said softly, no more desperate moment than when you find yourself totally and completely alone."

The group ultimately vowed their relationships would remain steady no matter what happened. It was a promise destined not to be kept. Conflicts over business strategy and personal style reached the firm's board of directors, which eventually appointed a new president and chairman. A few months later, Kuo and his wife, Kimberly,who had given up a job in the communications unit at America Online Inc., left the company as well.

The disagreements linger, even though the firm closed its doors about a year ago. In a voice-mail message, Winn challenged Kuo's account in "Dot.Bomb," which he said he had recently listened to in audio form.


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