In New Trial, PurchasePro Founder Faces Additional Charge
Wednesday, October 10, 2007
A former dot-com billionaire who allegedly cheated investors at his software company also tried to defraud a federal court at his trial last year by pushing his lawyer to introduce phony e-mails as evidence, prosecutors said yesterday.
Charles E. "Junior" Johnson, 46, whose now-defunct company PurchasePro became embroiled in an accounting scandal with AOL in 2001, headed to trial again in U.S. District Court in Alexandria on charges including stock fraud, conspiracy and witness tampering. Prosecutors added the charge of obstruction of justice, for allegedly urging his attorney to use fake e-mails in the cross-examination of a government witness.
Johnson was one of four executives, including two mid-level executives from AOL, who were tried last year for the alleged stock fraud. But during the trial, U.S. District Judge Walter D. Kelley Jr. declared a mistrial in Johnson's case.
Prosecutors did not reveal all the details of the alleged trial obstruction. Johnson's former lawyer, Preston Burton, is expected to testify for the government. He declined to comment.
In the first quarter of 2001, as the dot-com bubble was bursting, PurchasePro of Las Vegas was having a hard time selling its core product, a "marketplace license" that supposedly facilitated business-to-business purchases over the Internet.
PurchasePro had advised Wall Street that its revenue would increase significantly in the first quarter of 2001, even though its product was essentially a failure, prosecutor Timothy D. Belevetz said in his opening statement. PurchasePro relied heavily on a partnership with AOL to sell the licenses, and AOL resorted to secret side deals and sham accounting to unload the licenses on other businesses.
At last year's trial, PurchasePro executives testified that they concealed the fraud to make it appear that PurchasePro had met its sales goals in the first quarter of 2001.
Johnson, the company's largest stockholder, never sold his shares, even as the stock collapsed and became worthless. Johnson's attorney, Yale Galanter, said in his opening statement that Johnson's refusal to sell the stock when it was valuable proves he was not engaged in stock fraud. Galanter did not address the obstruction-of-justice charge in his statement.