PurchasePro creditors to receive money

Las Vegas Mayor Oscar Goodman figured he lost all of the $50,000 he invested in PurchasePro.com, a Las Vegas-based e-commerce company that has been in bankruptcy since September 2002.

Goodman, however, described himself Monday as the "happiest mayor in the world" when he learned that he will get back some of that money thanks to a successful bankruptcy case that recovered more than $50 million for creditors of PurchasePro.com.

The estate has several million dollars available for distribution to stockholders as well.

However, it's not clear how much stockholders will get because officials have yet to decide which shareholders will be treated as "culpable" insiders, said Greg Garman, managing partner of law firm Gordon Silver and lead attorney for the PurchasePro estate. Culpable insiders will not receive any money for shares they held in PurchasePro, and that will leave more money to divide among other shareholders.

The PurchasePro estate is paying unsecured creditors all they are owed, plus several years of postbankruptcy interest that totals about 20 percent of the principal amount. Bankruptcy officials started mailing checks to unsecured creditors late last week and hope to send checks to about 25,000 former shareholders of PurchasePro stock by the end of the year.

Lisa Poulin, PurchasePro bankruptcy trustee and a senior executive with CRG Partners, said officials are "very delighted" about the money recovered for PurchasePro creditors.

"It's not an everyday event in bankruptcy" to have money left over for stockholders and unsecured creditors, she said.

Garman said: "It's a very rare bankruptcy case that unsecured creditors get paid in full."

Attempts to reach Charles E. Johnson Jr., former chief executive officer and principal founder of PurchasePro, failed. Johnson is serving a nine-year prison sentence for conspiracy to commit securities fraud, securities fraud and obstruction of justice.

The company cooked its financial books to inflate revenue for the first quarter of 2001 in a scheme that the government said involved employees at AOL Time Warner.

Time Warner dropped the "AOL" from its name in 2003, after AOL had lost its dominance as an Internet portal. Time Warner said in May that it will spin off AOL into a separate company.

PurchasePro operated and licensed clients to use company software to solicit bids for goods and services. Its shares shot up during the dot-com boom days before crashing.

At its peak, PurchasePro employed about 1,000 workers, but the number dwindled to less than 20 by the fall of 2002, said Steve Stern, former public relations director.

"I'm grateful to Gordon Silver for getting me the rest of my compensation at PurchasePro and very pleased for the shareholders who can finally see absolute closure in this matter," Stern said.

Mary Alyce Smith, PurchasePro's former vice president of human resources, said: "I think it's nice that a lot of people who were hurt by the process will recover some money. That's a good thing."

Smith believes she already has been paid all that PurchasePro owes her.

Neither Stern nor Smith were accused of wrongdoing at PurchasePro.

Scott Wiegand, the former general counsel of PurchasePro who was acquitted of criminal charges, declined to comment.

Many local residents invested in PurchasePro shares around the turn of the century. Goodman decided to buy shares as well after he met Johnson.

"I was very impressed with his business acumen," Goodman said. "I went into it right before it collapsed."

Goodman said he invested $50,000 in PurchasePro shares, "a lot money to me."

The stock hit a high of $343.75 in December 1999 but traded for a few cents a share after the 2002 bankruptcy filing.

In his mind, Goodman said he wrote off the investment as worthless. So Goodman was pleased to hear that he could get some of his money back.

"It's good news," he said.

PurchasePro obtained bankruptcy court approval in May of a settlement agreement for an undisclosed sum with Gateway Cos. Inc., the computer maker. Already, the estate had judgments against the company then known as AOL Time Warner, Office Depot and American International Group, which provided insurance coverage to PurchasePro.

The PurchasePro estate has also received cash from the sale of its Internet business and collections.

The bankruptcy estate may recover additional sums in the future from defendants convicted of crimes, Garman said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.