Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Identix (IDNX) -- Ignore unavailable to you. Want to Upgrade?

To: steve who wrote (25381)	12/19/2003 9:28:15 AM
From: steve	Read Replies (1) \| Respond to of 26039

Viisage Technology Touched by Bribe Scandal Involving Former Illinois Governor By Ross Kerber, The Boston Globe Dec. 19--Viisage Technology Inc. of Littleton won a $27 million driver's license contract in Illinois with the help of two officials who were indicted this week on federal racketering charges in Chicago, according to documents in the case. Viisage wasn't charged with wrongdoing, and the company says it fired a lobbyist, Lawrence E. Warner, last year after learning of his allegedly illegal activities. Warner was a close advisor to the state's former governor, George H. Ryan, and both were charged Wednesday in a sweeping indictment alleging they worked together to steer contracts to companies that had been solicited for payments and bribes. The case could raise questions for Viisage's new executive team as it seeks other government identity-card contracts, its core business. Among other allegations, prosecutors say Warner received $800,000 in lobbying fees from the company but hid the relationship even as he and Ryan, then Illinois secretary of state, worked to help it obtain the driver's license contract in 1997. "The fact is, we don't know if Viisage was a victim here, or if they were paying a bribe," said David Druker, press secretary to current Illinois secretary of state Jesse White. On the other hand, White's office recently gave Viisage a $13 million contract extension, Druker said, based on the company's performance. As far as future orders for Viisage, "It's difficult to judge how this will affect them," Druker said. Viisage chief executive Bernard Bailey, who joined the company last year, said he doesn't expect repercussions for the company's business, although two employees were subpoenaed in the case. "My employees told me this has nothing to do with Viisage, and that Viisage will not face charges," he said, adding that the workers were told this by Justice Department officials. The employees are no longer with the company, he said. Viisage is perhaps best known as a provider of face-recognition software for use in security systems after the Sept. 11 attacks. But its software and competing systems have posted mixed results in trials of the technology, including one at Boston's Logan International Airport this year, and Viisage's share price has lagged. Federal prosecutors declined to discuss the role of Viisage beyond the charges issued Wednesday against Ryan and Warner, both of whom have denied wrongdoing. Some claims were previously outlined by prosecutors, though this week they named firms affected by the scheme. According to the charges filed this week, in 1996 Ryan tipped off Warner that another state official preferred Viisage's design for a new digital driver's license system. Warner then signed a lobbying deal with Viisage to help it win the contract and was paid $800,000 for his work. Viisage eventually won the $27 million deal to build and install workstations to record a driver's photograph and to print a new license at 158 locations, according to a company news release. Warner kept his name off an initial lobbying contract and received confidential bidding information from Ryan, according to the charges. Ryan's decision to award the digital licensing contract to Viisage was "part of the scheme," the prosecutors said. Warner and an unnamed government employee also bought stock in Viisage prior to the announcement of the deal. Bailey and other new managers have cut Viisage's losses and increased its revenue. In supplying driver's license systems it competes with Oregon-based Digimarc Corp.,which bought former units of Waltham-based Polaroid Corp. John Munday, former president of Polaroid's identity-systems business and now an industry consultant, said Bailey and others at Viisage now face the risk that another company could challenge the current contract. "It's not clear that Viisage did anything wrong. The problem for them is going to be if this leads to the conclusion that the government made an improper decision," Munday said. Separately, Viisage disclosed in November that the Securities and Exchange Commission told the company that it uses an inappropriate accounting method and should find another. The method is known as "percentage-of-completion accounting," based on how much work is done during a contract period. The company said it and independent accountants, BDA Seidman LLP, and former accountant Arthur Andersen LLP, believe the method is appropriate. Viisage chief financial officer Bill Aulet said talks with the SEC are continuing. newsalert.com steve