Ominous Edifice

By eweek  |  Posted 2001-06-04 Print this article Print

Ominous Edifice

One of ICGs biggest expenditures was for the plush — some say ostentatious — $34 million corporate headquarters Bryan had built in Denvers Tech Center. The building is a lavish edifice of black marble designed by an architect who was a college friend of Bryans. When it was dedicated in 1998, Bryan told The Denver Post:

"The building slants outward and upward, a little bit like our business. We are a relatively small company in a competitive industry, and in order to be successful, we have to be pretty darn aggressive. We wanted a dramatic-looking building that reflected what were all about."

But to those who lost their jobs and stock options, the building is now an architectural symbol of something else — of things being "askew" within the company.

"The building tilts," quipped one former employee, "just like ICG was tilted . . . out of kilter, you might say, with good corporate norms."

Executive turnover kept the company in a kind of constant turmoil, said Cindy Schuster, former director of business development.

"We had trouble in business development figuring out exactly where the company wanted to go," she said. "One executive might order equipment for a major product line he was promoting, and then leave before the project was initiated. No one knew what to do with the equipment or the project, so they did nothing with it."

Additionally, Bryans persistent absenteeism — he lived in New York most of the time and visited Denver two or three times per month — left senior vice presidents competing with each other for control, a former communications director at the company said.

"No one knew who was in charge," he said. "There was a vacuum of leadership. They hired people who had worked for the regional Bells or other telecom companies and had been passed over for top jobs. They seemed to come to ICG with the agenda that they would make money quickly and get out. There was no corporate culture, no loyalty. It exacerbated the problems immensely."

On the sales side, commissions were paid on sales before they resulted in revenue. Eighty-one sales employees hired between March 1999 and May 2000 were given up-front payments totalling nearly half a million dollars, according to a sales commission audit. All of them had left the company within nine months; several of them never generated any sales.

There was also an absence of inventory controls and an apparent push to spend for the sake of spending.

"We were buying equipment from Cisco Systems and someone told Bill Beans that someone had placed a single purchase order with them for more than $50 million. He wanted ICG to have the biggest purchase order ever, so we put together a single order for $61 million. It was about ego," said Keith Minard, the companys former director of network deployment, who was discovered to have a falsified résumé and a criminal background.

Minard was fired in February of last year over allegations he misappropriated companyequipment and ran an adult Web site on company equipment, allegations he denied. He spoke to Interactive Week before we discovered evidence of his criminal past. His comments were confirmed by other sources.

Meanwhile, the companys former security investigator, Greg Caldwell, said that Beans and another corporate executive directed him to conduct a forensic audit of company equipment in September. His findings — or lack thereof — confirm details about lax inventory controls cited in documents obtained by Interactive Week.

"We attempted to track all this equipment for the data center in Denver through project numbers, and tried to tie those to purchase orders and bills of lading," Caldwell said. "When that didnt work, we tried to backtrack it through serial numbers, but the numbers had not been properly recorded. We just couldnt do it. The records just were not there."

Caldwell said he told company officials that such a situation made it very easy for the company to be abused internally by fraud and employee misconduct. Evidence from his investigation led to several firings.

"In fairness, the accounting department was pretty overwhelmed at the time, preparing for the bankruptcy, so it was difficult to get help from them. But records that should have been there were not there. Serial numbers had not been recorded in many cases," he said. The forensic audit became an exercise in futility, and was abandoned "basically at my recommendation."

That spending was wide-open at ICG was clear to management.

"We bought the Cadillac of everything, with all the options, all the trimmings," said one former supervisor. "There was never any restriction on cash. And toward the end, there was no such thing as a budget. The order of the day was to spend money, and everyone did."

Internal memoranda prepared after the companys financial collapse and management changes also refer to "exorbitant purchases" by former employees, raising the possibility that individuals with purchasing authority diverted funds from the company.

In one instance they refer to a $100,000 piece of equipment known as an Enterprise 4500 — most likely a Sun Microsystems Enterprise 4500 Server — which "disappeared" during consolidation of equipment in California. Other documents refer to $100,000 worth of laptop computers that were never returned to the company by ex-employees because of faulty inventory controls. It refers to "untold losses" from missing pagers, cell phones and other expensive equipment signed out to employees.

While ICG would not talk about excessive inventory purchases and lost or stolen equipment, a footnote in the companys 1999 10K — filed with the Securities and Exchange Commission at about the time of the Hicks-Malone investment in the company — noted that "$237 million" in "transport and switching equipment" that the company had purchased "had not been placed in service as of Dec. 31, 1998."


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