I"ve got some great articles on Que Pasa from Arizona regional papers talking about the great board of directors of the company, the great Gary Trujillo, and among others, a negative article that should be read but not dwelled upon. They are all below ... a long post ... sorry...
A.M.
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THE ARIZONA REPUBLIC
July 4, 1999 Sunday, Final Chaser
HEADLINE: CLOUD OVER QUEPASA.COM;
DISTANCES ITSELF FROM TAINTED FORMER EMPLOYEE
BYLINE: By Dawn Gilbertson, The Arizona Republic
Quepasa.com boasts an impressive lineup of board members. Phoenix Suns President Jerry Colangelo. Former FDIC chief William Seidman. Former Costa Rican President Jose Maria Figueres.
But the tainted background of an early investor and employee nearly derailed the stock offering of the fledgling Internet search engine and information source for Hispanics.
The stock began trading a week ago at $12 a share and zoomed above $17 the
first day. It closed Friday at 189/16.
The early success on Wall Street belies an eleventh-hour scramble to get
the deal completed. Behind the scenes, Quepasa cut all ties to the former
employee, Richard Whelan, and his current employer, Monolith Limited
Partnership, one of Quepasa's largest shareholders.
Whelan, a former stockbroker, has had his securities licensed revoked by
Arizona regulators, been fined and suspended by the National Association of
Securities Dealers and is being sued by the Securities and Exchange Commission
for fraud.
The distancing between Quepasa and Whelan is sketched out in documents
filed with the Securities and Exchange Commission from March through last
week.
The push to clean up the company was sweeping. Seidman and other new
directors were brought in. The company's young founder and CEO, who sold
shares to Whelan and Monolith a year ago and briefly put Whelan on the
payroll, was demoted. Some of his colleagues were replaced. And Monolith's
shares were sold.
Seidman, who was named to the board less than 10 days before the stock
began trading, confirmed what many Valley securities lawyers had suspected:
The changes were largely dictated by Nasdaq Stock Market officials.
"It was a condition of the (stock) listing," Seidman said in a telephone
interview from Washington, D.C., where he's chief business commentator for the
cable network CNBC.
He said severing Whelan's ties to Quepasa also was a condition of Seidman's
joining the board.
Seidman was invited to join the board by Gary Trujillo, a well-known
Hispanic business leader in the Valley, who was quickly promoted to Quepasa's
top spot during the shuffle. Their relationship goes back to the early 1980s,
when Seidman was dean of the College of Business at Arizona State University
and Trujillo was an undergraduate accounting student and head of the Hispanic
students group.
"He came to see me with his problems," said Seidman, who called his
involvement in Quepasa "an effort to help the company out of a bad moment."
Seidman is the only person connected with Quepasa who would comment on the
many changes leading up to Quepasa's $48 million initial public offering,
which was completed a week ago. A company attorney said officials are still in
the "quiet period" mandated by regulators and are barred from discussing the
deal or the company's business.
Quepasa issued this statement in response to questions from The Arizona
Republic: "Quepasa.com is committed to providing a strong and forward
management structure along with an independent and experienced board of
directors. The effect of the additions, changes and restructuring of the
management responsibilities is to allow Quepasa.com to benefit from the
specialized expertise of our chairman, CEO, president and members of the board
of directors."
SEC and Nasdaq officials also wouldn't comment. Whelen could not be reached
for comment.
IPO DOCUMENT REVEALING
But the IPO documents filed with the SEC spell out the push to put miles
between Whelan and Quepasa.
Consider:
/ The month before the June offering, Whelan sold the 443,500 Quepasa
shares he owned to two other investors in the company and resigned from WGM
Corp., Monolith's general partner. Shortly after, Monolith also sold off its
more than 1 million Quepasa shares, or at least enough no longer to be listed
in documents as a principal stockholder. Until a June 16 filing, it was listed
as Quepasa's third-largest shareholder, with a 14.2 percent stake.
/ Colangelo, Seidman and others stepped in to buy some of Monolith's
shares. Colangelo, who already owned 75,000 Quepasa shares, bought 260,000
more for $1.76 million through Internet Partners LLC, a company he formed with
three other, unnamed investors.
Trujillo bought 15,000 shares from Monolith for $6.75 apiece.
Seidman bought about 7,000 shares at $6.75 from Monolith, and Kevin
Dieball, an investor brought in at the same time as Whelan and Monolith.
/ A $2 million loan Monolith made to Quepasa for working capital was paid
off with proceeds from the IPO, instead of over the next two years as
originally planned.
/ A game of musical chairs ensued in the executive suite and boardroom.
Trujillo, who has his own consulting firm, had a rapid rise. He wasn't an
officer when the IPO was filed in March, but was named president in April,
promoted to chief executive officer and chief operating officer by mid-June
and was named chairman shortly after.
The titles were stripped from Quepasa founder Jeffrey Peterson, who sold
shares to Whelan, Monolith and three others for less than a penny a piece in
Quepasa's infancy a year ago. Peterson's current title is chief technology
officer.
Another official Peterson brought in as a consultant and sold stock to,
chief operating officer and director Michael Hubert, lost his positions.
Veteran Phoenix securities attorney Doug Dunipace of Jennings, Strouss &
Salmon in Phoenix said the undercurrent to the changes is clear: "We need to
do everything we can to divorce ourselves from Mr. Whelan."
Judging from Trujillo's rapid promotion and other additions to the board,
Dunipace said it also appears there was a big push, whether by the firm's
underwriters or other advisers, to put more of a Hispanic face on the company
to boost investor confidence.
"This is going to be a really big Hispanic-focused entity and we got a
26-year-old Anglo kid (Peterson) as the chief executive officer. That doesn't
work," he said, describing the likely mind-set at the time.
Overall, "there was probably a lot of panic time," said Tom Taulli,
analyst with Edgar-Online and author of the new book Investing in IPOs.
"They just wanted to clear the decks, pay whatever has to be paid off.
Just clean it up . . . and bring in someone with a great amount of stature,"
he said.
To be sure, changes in management and board makeup and other restructuring
are common at companies making their debut on Wall Street, especially when
they're startups, as most Internet firms are.
Taulli calls it a corporate cleanup.
"A lot of these companies are started out of a garage," he said. "They
have their corporate charter from a book that was bought at a bookstore."
A couple of things stand out about Quepasa, however. First is the timing of
the changes. They were made after the company filed its registration statement
in March, in some cases a week, or even days, before the IPO was priced.
And Seidman doesn't show up as a director until a mid-June filing. At first
he's listed as chairman, and later simply as a director. (Seidman said he was
asked to be chairman but declined because of time constraints.)
Many of the reshuffles also were significant, especially the disappearance
of Monolith as a major investor.
"It's not uncommon for a company, when they go public, to do something
like they did in changing the CEO and putting more credible names in the key
positions to facilitate the IPO," said Stephen Barnes, a Phoenix money
manager who has followed the deal but did not invest in the company. "But to
do it at the last minute and to this extent is what's disconcerting."
There also are questions about Quepasa's limited disclosure about Whelan's
ties to the company and his background in its early SEC filings.
The company did disclose from the start that an accounting firm it hired
quit after two months because it didn't want to be associated with the
company's financial statements because of the background of one of its
employees, but Whelan isn't mentioned by name. His name doesn't come up until
mid-June, when it's disclosed that Peterson sold shares to Whelan and
Monolith.
AMENDED STATEMENT FILED
At the same time, the company amended the statement about the accountants to
say the employee had securities troubles. Still, Whelan wasn't mentioned by
name.
Taulli wonders if there are other skeletons in the closet.
"What other things haven't been disclosed? What might lurk in there?" he
said. "I'd be concerned."
Others say the flurry of changes can only be viewed by investors as
positive.
"It seems to me what they've done is really strengthened the board and
hopefully by the board owning more stock, it'll benefit the shareholders,"
said Quinn Williams, senior partner in Snell & Wilmer's corporate and
securities group.
Seidman says he thinks the Whelan/Monolith problem is behind the company.
He sees good times ahead.
"I think this company has some very bright young people in it and has,
hopefully, good prospects," Seidman said.
; (1) PROFILE
Quepasa.com
* What: Internet site aimed at the Hispanic market with a search engine, free
e-mail and Spanish-langauge news.
* Headquarters: Phoenix.
* Chairman and chief executive officer: Gary Trujillo.
* In the news: The company recently completed a $48 million public stock
offering.
* Stock symbol: PASA on Nasdaq.
(2) BACKGROUND
Regulatory problems
Richard Whelan's regulatory problems date back to his employment with the
now-defunct Scottsdale brokerage firm Franklin-Lord Inc. and other firms in
the early to mid-1990s.
In 1994, the National Association of Securities Dealers fined Whelan $20,000
and suspended him for 10 days for engaging in private securities transactions
without notice to the firm.
In 1996, Arizona securities regulators revoked his securities license and
fined him $11,000 for the sale of unregistered securities, fraud and filing
false or misleading information.
The SEC has a civil lawsuit pending against him and a former Franklin-Lord
colleague, Brett Bouchy, alleging they were behind fraudulent securities
schemes that netted the pair more than $782,000 over two years or so. In a
motion for summary judgment filed last month, the SEC is seeking the return of
those gains and civil penalties. If the SEC prevails, it will seek to
permanently bar them from the securities business, an SEC attorney said.
A billboard advertising quepasa.com is located at the corner of Seventh
and Roosevelt streets in Phoenix. The company began selling shares to the
public last month.
1) Jerry Colangelo / Phoenix Suns president is one of the company's board
members. 2) William Seidman / Former chief of the Federal Deposit Insurance
Corporation was a late addition to the board. 3) Gary Trujillo / Chairman of
the board, wasn't an officer of the company when the IPO was filed in March.
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THE ARIZONA REPUBLIC
June 25, 1999 Friday, Final Chaser
HEADLINE: RECEPTION HOT FOR QUEPASA.COM;
INVESTORS BID UP WEB SITE IPO IN HEAVY TRADING
Quepasa.com, a Phoenix firm that operates a Spanish-language Web site and portal, got a hot reception Thursday on Wall Street, proving that Internet fever knows no linguistic boundaries.
The money-losing company, whose insiders include several prominent political and business leaders, and football star John Elway as an investor, sold 4 million shares at $12 each in an initial public offering, then watched as investors bid up its stock price to $17.13 by the end of the trading session.
About 6 million shares changed hands.
Quepasa.com features a search engine, free e-mail, Spanish-language news feeds, chat rooms and message boards. It is a portal, or gateway, to other Web sites. Some of its content is in English.
The company hopes to generate fees from third-party advertisers. Traffic on the site has exploded since its November launch. The site recorded nearly 4.6 million "hits," or page visits, in May, up from 104,000 in January, and user sessions have lengthened.
But the developmental-stage company has yet to post any significant revenue, let alone a profit. It lost $3.7 million, or 41 cents a share, during the first quarter of 1999, following $6.5 million, or 72 cents a share, of red ink in 1998.
Quepasa.com's prospectus, or stock-offering disclosure document, predicts the firm "will continue to incur significant losses and may need to raise additional capital."
Of the more than $40 million reaped in Thursday's sale net of underwriting costs, about half will be used for marketing and advertising. Other uses will include Web-site content development, equipment purchases, overhead and working capital.
The company counts among its directors prominent business and political leaders such as:
* Jerry Colangelo, president of the Phoenix Suns and managing general partner of the Arizona Diamondbacks.
* L. William Seidman, former chairman of the Federal Deposit Insurance Corp. and of the Resolution Trust Corp., and a former dean of the College of Business Administration at Arizona State University. He was named chairman of Quepasa.com's board this month.
* Jose Maria Figueres, president of Costa Rica from 1994 to 1998.
* Alan Sokol, chief operating officer at Telemundo, a Spanish-language television broadcaster.
Edwin Lynch, general partner of Westcor Partners, a Phoenix real estate development company, had been a partner at Quepasa.com until recent weeks.
The company's chief executive officer and chief operating officer is Gary Trujillo, who founded Southwest Harvard Group, a consulting firm. At 38, he's the oldest member of the company's senior management team, which averages 31 years of age. Trujillo joined Quepasa.com in April.
The company's president, chief technology officer and founder is Jeffrey Peterson, a 26-year-old former stockbroker who founded an Internet design firm called NetCentury two years ago. Peterson had been chairman of the board and CEO until recently. He has lent $2.3 million to Quepasa.com to date, and another stockholder extended a $2 million loan.
Peterson, Sokol and Telemundo are the largest stockholders, each with about 1.6 million or more shares, adjusted for options and warrants.
The company's management believes the Spanish-language Internet market is underserved. To help promote itself, Quepasa.com entered into an agreement with Telemundo. The Phoenix company bought $1 million in advertising and received a $5 million advertising credit on the TV network. In exchange, it issued 600,000 shares to Telemundo and warrants to purchase an additional $1 million worth of stock.
All told, options and warrants to purchase 3.4 million shares at below-market prices were outstanding as of April 27.
Other agreements include payment of $720,000 to Miami Herald Online for its editorial staff to produce a bilingual news channel for Quepasa.com., and $1.5 million to the Diamondbacks for marketing and promotional assistance for the 1999 baseball season. That package will include TV and radio broadcast time for Quepasa.com, signage at Bank One Ballpark and other promotional assistance.
Quepasa.com's headquarters is at 400 E. Van Buren St. in downtown Phoenix. Its shares trade on the Nasdaq National Market under the symbol PASA.
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Business Dateline;
Business Journal-Phoenix & the Valley of the Sun
May 7, 1999
HEADLINE: Big boost for Spanish web site
BYLINE: Angela Gonzales
Quepasa.com Inc., which created the first Spanish-language Internet gateway in Phoenix, has launched a $40 million initial public offering and added three heavy hitters to its board room.
Gary Trujillo, president and chief executive officer of venture-capital firm Southwest Harvard Group, has been named president of the company.
And joining its board of directors are Jerry Colangelo, president and CEO of the Phoenix Suns and CEO and managing general partner of the Arizona Diamondbacks; and Eddie Lynch, general partner of Westcor Partners and the Suns.
"I think that the potential for this company is stratospheric," said David Cavasos, deputy aviation director of Sky Harbor International Airport and chairman of the Grand Canyon Minority Supplier Development Council.
"With Gary at the helm- with his entrepreneurial background and success record - a partnership between this master of the Internet world and a person who knows high finance, I think this will get this company off in the right direction," Cavasos said.
That "master" is Jeffrey Peterson, the 26-year-old founder of the Spanishlanguage web site (quepasa.com), which also is available in English.
Peterson has more than 15 years of experience in programming and operating computers and digital communications.
Quepasa.com officials are prohibited by the Securities and Exchange Commission from speaking publicly about the company during the "quiet period" of the IPO.
According to SEC filings, the company is offering 4 million shares, ranging between $10 and $12 per share. Net proceeds are expected to be $38.9 million, or $44.8 million if an over-allotment option is exercised.
According to the filings, Quepasa.com is poised to take advantage of the phenomenal growth and spending power of the U.S. Hispanic population, which is near 30 million. It is expected to grow to more than 41 million, or 14 percent of the total population, by 2010.
Total U.S. purchasing power is projected to be $383 billion in 1999, representing an 84 percent increase since 1990.
Plans call for using $24 million of the IPO proceeds to advertise and market the web site. The company already launched an $800,000, 26-week nationwide advertising campaign with the Spanish-language Telemundo Network Group.
Quepasa.com has struck a sponsorship agreement with the Diamondbacks. For a sponsorship fee of $1.5 million, Quepasa.com will get English and Spanish television and radio broadcast time, ballpark signage and Internet and print promotions. An initial $500,000 was paid in April, with the remaining $1 million due over the 1999 baseball season.
Quepasa.com reported a loss of $6.9 million in 1998, the year of its start-up. The company plans to generate revenue from advertising on its web site.
Realizing that web-based advertising is an unproven source of revenue, company officials expect to continue to incur significant losses and may need to raise additional capital, according to the SEC filing.
Phoenix attorney Danny Ortega said Trujillo, 38, has proven he is capable of leading any type of business or partnership.
Trujillo can't comment during the quiet period, but associates say he will retain his venture-capital position as well as oversee Quepasa.com.
Trujillo, who earned his MBA from Harvard, also is a partner in Corrella Electric Wire and Cable Inc., the largest minority-owned business in the Valley.
"Given his success," Ortega said, "I would think that Quepasa is going to be very, very successful under his helm."
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Valley of the Sun 1998;
Business Dateline;
Business Journal-Phoenix & the Valley of the Sun
October 16, 1998
HEADLINE: Former competitors merge to meld strengths for profit
BYLINE: Angela Gonzales
Six years ago, John Corella and Gary Trujillo were competing against each other for a $100 million contract with AT&T. Both knew they couldn't snag the contract on their own, and each was looking for a partner. Corella, president and chief executive officer of Corella Companies, flew to Washington, D.C., to interview candidates. He was ready to sign on with a Dallas company when Trujillo, president and chief executive of Southwest Harvard Group, called him in Washington and suggested that Corella choose him instead. "I was packed, and just leaving my hotel to fly to Dallas," Corella said. Trujillo asked if he could fly to Washington to meet with Corella. "You can come," Corella told Trujillo. "But I'm not going to be here. I'm on my way to Dallas." Trujillo, who never takes "no" for an answer, was at the Dallas airport, waiting for Corella. (Photograph Omitted) Captioned as: John Corella, left, and Gary TruJillo joined forces to gain AT&T contract and liked the result. (Table Omitted) Captioned as: EMERGING BUSINESS Impressed by his tenacity, Corella met with him. By that night, before the Dallas company ever got a chance, Trujillo and Corella signed a deal. The duo formed Corella Electric Wire & Cable Inc. and won the AT&T contract to manufacture telecommunications wire, now worth $500 million. Corella is expanding its manufacturing plant in west Phoenix from 10 to 16 wire extrusion manufacturing lines. "We were blessed by finding each other with the help of the good Lord," Trujillo said.
This, said Trujillo, is why Hispanics should work together rather than against each other to be successful. "Historically, we as individuals feel that we can be much more successful independently than as a nucleus with other successful people," he said. "It's come to our attention that by joining forces, by working together, we can leverage our resources, our talents and our vision to become twice as successful together than if we were as individuals." Now, they're taking their partnership to another level by forming a new company, The Corella-Trujillo Group. It will serve as a holding company for future joint endeavors. The duo will have equal partnership interests in the new company, which has offices at the top of a 25-story high-rise at Central Avenue and Osborn Road. Looking back, Trujillo said he wishes they would have made this decision six years ago. By now, he said, they could have doubled or quadrupled their successes. Corella, who had more than 20 years of experience running a business compared with Trujillo's two years when they first partnered, isn't so sure. There may have been lost opportunities, he said. But did we lose by staying focused? he said. "By staying focused, what we were doing was more than we ever expected." Trujillo will continue to run Southwest Harvard Group, a venture capital company in Phoenix, while serving as president of the new holding company with Corella. Corella will be chairman and chief executive. "It's exciting, some of the things that are being put before us," Corella said. "I'm tired of chasing planes. Gary can chase the planes. My role has changed a bit Gary is the leader of this ship." Trujillo doesn't pass an opportunity to shower praise on his partner. "He's really the head of the ship," Trujillo said. But most importantly, they both said, is to have fun. "If we're not going to enjoy it, we may as well not do it," Corella said.
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THE ARIZONA REPUBLIC
July 13, 1997 Sunday, Final Chaser
HEADLINE: A BARRIER TO CROSS;
HISPANICS HIT OWN VERSION OF GLASS CEILING IN BUSINESS
BYLINE: By Julie Amparano, The Arizona Republic
Gary Trujillo's goal was simple: to become a partner in a Wall Street firm.
But after a seven-year struggle to reach that goal, he concluded he'd never get there for a reason he couldn't overcome. He is Latino.
"It's almost impossible for Hispanics to make it in the business world," said Trujillo, who quit investment banking, got an MBA from Harvard University and launched a successful venture-capital firm in Phoenix. "We just can't seem to gain any ground."
At a time when Hispanics are an estimated eight years away from becoming the country's largest ethnic group, corporate America has admitted relatively few into its executive chambers.
Of Arizona's 25 largest publicly traded companies, only five have Latinos in senior management. Only one includes a Hispanic woman.
Phelps Dodge Corp., Microchip Technology Inc., Amerco, Arizona Public Service Co. and Employee Solutions Inc. are the only Arizona-based companies that have Hispanics in senior management. Of those companies, only Amerco and Phelps Dodge have invited Latinos into their corporate board rooms.
Nationally, the outlook isn't much better for Hispanics. The number of Latino chief executive officers, presidents and corporate directors in Fortune 1000 companies is minuscule. There are only seven Hispanics leading Fortune 1000 corporations, according to a report released last month by Washington-based Hispanic Association on Corporate Responsibility. Of 11,335 seats in Fortune 1000 boardrooms, only 124, or 1.1 percent, were occupied by Latinos in 1996, according to the report.
The number of Hispanic board members has declined since 1995, when Latinos held 132 board seats.
"This is shocking to me," said Itza Rodriguez, an Employee Solutions vice president and the only Hispanic executive in Arizona. "I thought there would be more Hispanics."
This year, Hispanic magazine couldn't find enough companies to fill its Latino 100 list, a salute to businesses that are committed to the advancement of Hispanics. This year's list had 75 companies.
"In many ways, Hispanics came of age last year, both politically and economically," said Alfredo Estrada, editor and publisher of Hispanic. "We voted in record numbers and realized a record purchasing power of more than $300 billion. However, corporate America failed to keep pace with our growth. For this reason, we have limited our listing."
All this comes at a time when the nation's Latino population is rising. There are 27 million Hispanics in the United States - 10.5 percent of the population. In Arizona, Hispanics have grown to 823,587, or 20.2 percent of the population.
According to U.S. Census Bureau projections, if Latinos maintain growth levels, they will become America's largest minority group by 2005 and account for one in four Americans by 2050.
"We can't figure out what is going on here," said Richard Bela, president of the Hispanic Association on Corporate Responsibility. "Our purchasing power is being recognized, but we're not being viewed as valuable assets in top management."
As a result, more and more Latinos are dropping out of the corporate world and going into business for themselves. People like Trujillo, and Ray Arvizu, who was a Coca-Cola manager for nearly five years. While Coca-Cola provided excellent experience, Arvizu says, advancements were difficult to come by.
"Every year, a new manager would be promoted and I would have to explain the Hispanic market and what my job was. I got tired of it," said 39-year-old Arvizu, who has built a $13.1 million Latino advertising agency that bears his name.
"Corporate America provided some good training. But you make the realization very quickly that you're not going to get anywhere when you see how few Hispanics there are in top management," he adds.
Trujillo also remembers seeing the writing on the wall when he was working at a brokerage in San Francisco. With each assignment, he got the message. Trujillo was allowed to handle jobs only for largely Hispanic municipalities. In investment banking, Trujillo explains, the big money is with corporations.
"I wasn't a blue blood, so I couldn't handle the corporate jobs, I guess," he said. "I certainly wasn't being tapped for my Spanish-speaking ability because I don't speak it fluently."
The defining moment, however, came during a party at his boss' mansion in the San Francisco Bay area. Standing by a window and gazing at Golden Gate Bridge, Trujillo asked his boss: "How long do I have to work at the firm before I can afford a home like his?"
Trujillo says his manager just looked at him and said: "At your level, you'll never get here."
"That's when I realized I had to go out on my own," Trujillo said.
At 36, Trujillo is chief executive officer and co-owner of Southwest Harvard Group in Phoenix and he says he can afford any size home he desires.
This exodus of Latino managers is helping fuel a boom for small businesses.
(THE REST IS CUT OFF BUT UNIMPORTANT) |
