Anthony,
IVIL: I've taken a small short position. First bits of news
are not so good. Hope this formats properly.
SH
Tuesday, March 09, 1999
Controversy hits Ivillage as
stock debut looms
Sandra Rubin
Financial Post
A women's Internet firm, poised to go public, has used "marginal"
and "inappropriate" financial practices to boost revenues and make
itself more attractive to investors, a former chief financial officer says
in an affidavit sworn out on the eve of the company's initial public
offering.
At the same time, the chorus of former senior executives saying they
were seriously wronged by iVillage Inc. has started to swell.
The women's online network, with its demographically prized target
audience, is expected to start trading on Nasdaq any day. Backed
by lead underwriter Goldman Sachs & Co. and investors such as
America Online Inc., the issue is widely seen as one of the hottest
IPOs in a sector that's smoking with the investing public.
But the sworn statement signed on Friday by the former CFO,
Joanne O'Rourke Hindman, raises troubling questions about
iVillage's past financial reporting.
Ms. Hindman says she was fired last year after expressing concern
about the New York-based firm's accounting methods.
"I learned that certain financial practices at iVillage were marginal
and even inappropriate," said Ms. Hindman, who worked for
Washington Post Co. from 1983 to 1995, most recently as
vice-president of finance for Newsweek magazine.
"Based on my experience at and my knowledge of iVillage, I would
not be comfortable today being the CFO taking this company
public."
Her affidavit was filed in Tennessee in support of Todd Kenner,
another former senior executive who is suing iVillage for wooing him
to New York from Nashville with the promise of options on
100,000 iVillage shares, then allegedly firing him without cause.
The promised options were never delivered, and Mr. Kenner will
be in court Friday seeking an injunction to get the shares set aside.
Ms. Hindman says she, too, was aggressively recruited by iVillage's
chief executive, Candice Carpenter, and promised 280,000 options
at an exercise price of $1.60 (US) once the company was taken
public. The shares have been priced at $12 to $14 (US), and could
shoot two or three times higher at the start of trading.
She says she took the job in September, 1997, becoming iVillage's
fourth CFO in less than two years, but quickly became alarmed at
the firm's financial practices.
"In particular, I felt the company was recognizing revenues
prematurely -- indeed, in some cases before letters of intent were
even signed," said Ms. Hindman, a certified public accountant. "This
is extremely important, especially for a startup company about to go
public.
"I was unwilling to accept any 'fudging' of the numbers, and I began
to express my concerns."
According to Ms. Hindman's sworn statement, Ms. Carpenter, an
iVillage co-founder and the public face on the company, was
determined to establish trends and "create the appearance of
momentum towards an eventual IPO, which she had been planning
long before my arrival.
"I recognized that making the changes I suggested would reduce the
company's revenue numbers, and that Ms. Carpenter was irritated
to hear my views; but I simply assumed . . . she would do the right
thing promptly."
Instead, Ms. Hindman says, she was demoted in November after
only eight weeks on the job, and fired in January, 1998. She says
she was invited to stay on as a consultant on financial matters but
refused. She quickly found other employment.
Jason Stell, iVillage vice-president, said he could not comment
because the company is in a "quiet period" before its initial public
offering.
Meanwhile, a second former senior iVillage executive stepped
forward Friday to support Mr. Kenner, saying he too was cheated
of promised options.
Steven Carter said in a filed affidavit that he was executive
vice-president of NBC Cable Networks, responsible for MSNBC
and CNBC, when iVillage "aggressively" recruited him. He says
Ms. Carpenter promised him options on 280,000 shares, which
would be worth "several million dollars."
He took the job as iVillage's executive vice-president of sales in
July, 1997, and found "a highly dysfunctional company" with a sales
force in disarray.
He says he lasted 15 months, building up the sales department and
initiating an aggressive sponsorship strategy, before discovering by
accident on Good Friday last year that Ms. Carpenter had given his
job to someone else. His promised options never materialized.
Mr. Carter said several others are in the same boat.
"When Ms. Carpenter tired of someone, her first thought -- which I
heard her express on more than one occasion -- was that she
needed to 'get their options back.'
"I am aware of this occurring with two different CFOs at iVillage, as
well as other top executives. I am also aware Ms. Carpenter
terminated two founders of a business unit . . . who were to get
substantial equity positions in iVillage.
"I have never seen a CEO and a company which deals with its
executives in such a consistently opportunistic, dishonest, and
malevolent manner."
Mr. Kenner, Ms. Hindman, and Mr. Carter say between them they
are owed 660,000 shares -- over one-sixth of the 3.6 million shares
being made available to the public in the IPO. |
